Chancellor faces widespread scepticism to enlarging eurozone bailout fund among German public and her own MPs
Helen Pidd in Berlin
guardian.co.uk, Tuesday 27 September 2011 21.08 BST
Germany pledged support to Greece today in a desperate effort to shore up the eurozone, but fell short of revealing the package of measures that the markets hope will be enough to save the single currency.
The chancellor, Angela Merkel, pledged solidarity at a meeting with her Greek counterpart, George Papandreou, just two days ahead of a crucial vote in the German parliament on the expansion of the bailout fund, which is regarded as the first step to increasing the firepower of the eurozone countries enough to buy up bonds and buttress troubled banks.
However, conscious of animosity among the majority of German voters towards helping the less prudent nation, Merkel attached strings to her support, calling on Greece to “do its homework” in implementing painful cuts and reforms.
The pair who avoided any talk of a Greek default, orderly or otherwise, or of any multitrillion-euro rescue plan, ahead of a dinner in Berlin on Tuesday night. Even so, stock markets rebounded strongly on hopes that the deal that emerged over the weekend at the International Monetary Fund meeting in Washington – to “leverage” the spending power of the €440bn (£382bn) bailout fund to €2tn, in conjunction with lending from the European Central Bank – was being worked on behind the scenes.
But before the European Financial Stability Facility can be beefed up, the bailout fund’s strengthened mandate must be ratified by parliaments across the eurozone. On Thursday the Bundestag will vote on whether to increase the powers of the EFSF – the forerunner of the permanent rescue facility, the European Stability Mechanism, due to come into force in 2013. However, three out of four Germans are against the move, which would raise the country’s contributions to the pot from €123bn to €211bn. Some parliaments do not vote until the middle of next month and also face opposition from a sceptical public.
Support from Germany’s opposition Social Democrat (SPD) and Green parties mean the bill is almost certain to pass. The question is whether Merkel will be able to command the so-called “chancellor majority” using only votes from her increasingly shaky coalition.
She needs 311 of her coalition’s 330 MPs to vote for the bailout if she is to go it alone and prove she is still in control. Failure to do so could not only trigger the collapse of the government but harm the entire European project, analysts said.
But there is scepticism. Carsten Schneider, a politician from the SPD, said it was “not acceptable” that the government was already adapting behind the scenes the very plans the Bundestag was being asked to vote on on Thursday. “Parliament will be systematically circumvented if [these] plans are not laid on the table before the vote,” he said.
One rebel from the chancellor’s Christian Democratic party (CDU) said he believed the bill would solve nothing.
“I’m voting ‘no’ on Thursday because I am of the view that in the best-case scenario, this expanded bailout fund will merely buy us time. It won’t solve the problems in the long run,” said Wolfgang Bosbach, an influential MP who chairs the parliament’s committee on internal affairs and who is not known as a eurosceptic.
“The question needs to be answered: how we are going to deal in the long term with those states in the eurozone who are hopelessly indebted and are not in the position to finance themselves.”
He said he was refusing to bow to demands from party whips to toe the line but admitted the pressure was there. He said he expected “five to 10″ other MPs from the CDU or its Bavarian sister party, the Christian Social Union (CSU), to vote against the government. Several politicians from the Free Democrats (FDP), the other coalition party, are also expected to rebel. They were meeting on Tuesday afternoon to debate the forthcoming vote.
The Greek prime minister had travelled to Berlin to bolster support for his beleaguered nation. Papandreou gave an impassioned address to leaders of German industry, appealing to his European partners to help him tackle the country’s debt crisis.
“I promise you, we Greeks will soon fight our way back to growth and prosperity after this period of pain,” he said.
Papandreou said he understood the reluctance of taxpayers in other European Union countries to help his country out of its crisis but said it was not an investment in the mistakes of the past, rather in the success of the future.
“The eurozone must now take bold steps toward fiscal integration to stabilise the monetary union. Let’s not allow those who are betting against the euro to succeed,” he said.
In her own speech to the Federation of German Industries (BDI), Merkel pledged her support. “We will provide all the help desired from the German side so that Greece regains trust,” she said.
“If the stability of the euro is at stake – and the experience of the last few years [tells us] that the difficulties of one country endanger our common currency – then that obliges us to show solidarity within the common currency.
“We will help if the country does all it can in terms of its own homework,” she said, also reiterating her opposition to common debt issuance in the eurozone – the much-discussed eurobonds.
A poll this month showed that 76% of Germans are opposed to granting any further aid to Greece and the mass-market Bild newspaper reflected public hostility to further bailouts by insisting Merkel should be tough on Papandreou.
“This is what you have to tell the Greek prime minister to his face, Frau Merkel,” wrote the paper, listing demands ranging from ensuring taxes were paid to getting rid of the bloated state apparatus and “thinking the unthinkable” – namely default, a debt restructuring and even leaving the eurozone.