Merkel praised in Germany for hard line on Greece debt crisis
German Chancellor Angela Merkel received wide praise at home ahead of May elections for negotiating a bailout package for Greece that limits the costs to Germany.
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Yet a German-backed bailout was politically risky. Parliamentary elections in the industrial western state North Rhine-Westphalia, an area where a bailout is unpopular, are set for May. A bad showing by Merkel's Christian Democratic Union or her coalition partner, the Free Democratic Party, could upset her center-right majority in the upper house of German parliament and derail her political agenda.Skip to next paragraph
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"The real question isn’t what Merkel wanted but why she wanted it," says Erik Jones, a European Studies professor at Johns Hopkins School of Advanced International Studies in Bologna. "She has to be able to present a credible case to the North Rhine-Westphalia electorate that they have not bailed out Greece."
In recent weeks, Merkel recognized that a bailout of some kind was inevitable. The IMF presented Merkel with a political out.
"We wasted a huge amount of time because a number of politicians including Merkel thought the IMF was unacceptable," says Charles Wyplosz, a professor of international economics at the Graduate Institute in Geneva.
"The precedent has now been set that Germany would have to [back bailouts of] other countries," Professor Wyplosz says, referring to countries like Portugal and Spain, which also carry dangerous amount of debt. "Germany is now forced to make the same promises elsewhere."
Even with limited German involvement in the plan, challenges here have begun. The first comes from four German professors challenging the plan on the grounds that it violates the EU’s no-bailout clause. In a Financial Times editorial today, economics and law professors Wilhelm Hankel, Wilhelm Nölling, Karl Albrecht Schachtschneider, and Joachim Starbatty said that Greece’s blatant flaunting of EU budget rules shows it is not worthy of a bailout and should be expelled from the euro zone.
"Removing Greece from the euro provides a way of preventing a drama from becoming a tragedy – and of ensuring the survival of monetary union," they wrote.