Dissension over Greek bailout weakens Merkel (+video)
Members of German Chancellor Angela Merkel's coalition balked at the second Greek bailout, even though it passed. The vote is seen as a defeat for her austerity program.
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The German parliament on Monday solidly backed the second bailout package for Greece. But for the first time since she took office in 2005, Mrs. Merkel did not get the so-called chancellor’s majority, the absolute majority from within her own coalition of three center-right parties. The vote is seen as a defeat for Merkel and her policies, which are focused on austerity and budgetary discipline as measures to solve the sovereign debt crisis in the eurozone.
While no one is yet questioning her de facto eurozone leadership, an extended crisis could become a decisive factor in Merkel's political future.
“This second bailout won’t do,” says Manfred Kolbe, a member of Merkel’s Christian Democrats, one of 20 members of Merkel's camp who refused to back her. “There is already a third one on the horizon. We are throwing good money after bad. Unless Greece becomes an economy that can compete with other eurozone members, we are wasting German taxpayers’ money.”
The chancellor conceded there was no guarantee this bailout would actually work, but warned that a Greek default could have unpredictable consequences for the financial security of Germany, the eurozone, and even the global economy. “I have to weigh risks,” Merkel said during the debate, “but I must not embark on adventures.”
For Peter Bofinger, one of Merkel’s economic advisers, the vote indicates a growing doubt about the rescue operation. “The problem is in large parts a communication failure by the government,” he says. “While it sets up billions of financial aid, the cabinet fails to impress on the public the gigantic efforts Greece makes to solve its debt problem. You cannot call Greece a bottomless pit in an attempt to meet voters’ sentiments, and still ask parliament to approve more and more credit.”
The second bailout for Greece since 2010 was approved by European leaders and the International Monetary Fund (IMF) last December, after it became apparent that a first package worth €110 billion ($148 billion) would not be enough to prevent the highly indebted country from going bankrupt. Following weeks of intense negotiations, EU finance ministers last week confirmed that Greece had fulfilled the tough conditions linked to the bailout – deep cuts in the state budget, a reduction of the minimum wage, and the lowering of pensions, among other things – and released the second package of €130 billion ($175 billion), pending the ratification of national parliaments where required.