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Merkel links Europe's future to Greek aid plan

Reuters
Wednesday 05 May 2010 04:30 EDT
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An international rescue plan for debt-stricken Greece must succeed or other European countries may suffer the same fate, threatening the bloc's future, German Chancellor Angela Merkel said today.

In an impassioned speech to the Bundestag lower house of parliament, Merkel said Germany was now convinced of the need to bail out Greece and confident the Greek government would carry out the swingeing cuts it had pledged to tackle its deficit.

"We're at a fork in the road," Merkel told the assembled lawmakers. "This is about nothing less than the future of Europe - and with it the future of Germany in Europe."

"There is no alternative to the aid to be agreed for Greece if we want to secure the financial stability of the euro area."

"It must come to avoid a chain reaction in the European and international financial system and the risk of contagion of other euro member states," she added.

At the weekend, officials from the European Union and International Monetary Fund (IMF) revealed details of a 110-billion euro ($147 billion), three year aid package conditional on strict austerity measures that have led to mass protests in Greece.

"Europe today is looking to Germany. Without us, or against us, there cannot or will not be a decision that is economically sustainable," she said to a Bundestag session in which she was regularly interrupted by shouts from opposition lawmakers.

Facing massive public opposition to a bailout for Greece, Merkel had long resisted committing to a rescue package, arguing that only through tough negotiations could the necessary steps to correct the Greek deficit be reached.

Frank-Walter Steinmeier, head of the opposition Social Democrats (SPD) in the Bundestag, accused Merkel of procrastinating to the detriment of Germany's standing in Europe.

"No German government has managed to throw away so much respect and confidence as you have in such a short time."

"Where was the leadership? Where was the crisis management Mrs Merkel? We saw nothing," Steinmeier said.

"What we are experiencing here ... is not a Greece crisis, it is a bit more than that, it is the biggest test for European integration since the Treaties of Rome."

The chancellor has sought cross-party support on a parliamentary vote for Greek aid due on Friday, but Steinmeier left it open as to whether the SPD would provide it.

Merkel said Europe would have to tighten its budgetary rules in future to prevent other countries going the way of Greece.

"Those that don't meet the Maastricht criteria then forfeit a part of their structural funds or agricultural funds. And that means in the case of long-running deficit sinners, the withdrawal of voting rights, at least temporarily," she said.

"For the most extreme situations, a procedure for an orderly insolvency must also be developed," she added.

The chancellor added she was glad German banks had pledged to help Greece, adding it was vital they keep credit lines open until 2012, when the aid package is due to expire.

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