The German parliament passed an unpopular Greek bailout today, paving the way for a $141 billion financial rescue of the debt-plagued Mediterranean country by the European Union and the International Monetary Fund to move forward.
The broad support for the bill signaled Germany's shift from stubborn opponent of the bailout to reluctant participant. Its passage was a victory for German Chancellor Angela Merkel, who in recent weeks has become a vocal supporter of the plan.
“We have no better alternative,” Finance Minister Wolfgang Schaeuble told the Bundestag, Germany’s lower house of parliament, before the vote. “Any other way would be more expensive and more dangerous.”
The bill allows Germany to contribute $28 billion to the rescue package. The Bundestag passed the plan with overwhelming support – a vote of 390 to 72 – followed by an endorsement by the Bundesrat, the upper house of parliament. The opposition Social Democratic Party abstained from the vote, arguing that the burden for the bailout would fall too heavily on German taxpayers.
Shift for Merkel
The vote marks the end of a long political road for the chancellor. Originally opposed to a bailout, which is widely unpopular in Germany, Merkel was eventually convinced to save debt-stricken Greece for the sake of financial stability in the eurozone, the 16 European countries who share the euro as a common currency.
But Merkel's support came at a steep price for Greece, which has been forced to accept unpopular spending cuts at home. Protests against the austerity plan passed by the Greek government continued in Athens today.
“I’m deeply convinced that credibility results only from tackling the root of the problem,” Merkel said during a panel discussion yesterday, according to Bloomberg. She also insisted on a “solid savings program for Greece.”
The German parliamentary action did little to calm world markets, which continued a third straight day of losses stemming from fears that the Greek crisis could represent the beginning of a larger problem. Other European Union countries, including Spain and Portugal, are also carrying dangerous levels of debt, and concerns are growing that they, like Greece, will be unable to pay back the money they owe, driving up the yields on their government bonds and increasing their borrowing costs.
Merkel yesterday blamed the growing fears of contagion – the debt problems of one nation spreading to neighbors – on traders betting against the euro. She also criticized rating agencies, which downgraded the outlook for debt in Portugal and Greece last week.
“In some ways, it’s a battle of the politicians against the markets,” Merkel said. “I’m determined to win… The speculators are our adversaries.”
Political price for Merkel?
The passage of the bailout plans came two days before elections in North Rhine Westphalia that could swing the balance of power in the German parliament away from Merkel’s Christian Democratic-Free Democratic coalition to the opposition. Without a majority in parliament, Merkel would have difficulty moving her agenda forward.
Ansgar Belke, macroeconomics research director at the German Institute for Economic Research in Berlin, said fears that the bailout could swing the election away from Merkel’s coalition are misplaced.
“People in North Rhine Westphalia do not think in international terms,” he told the Monitor. “I don’t think that Merkel is unsupported there. It is not as dramatic as it is often conveyed. The majority of people here will understand” the need for the bailout.
Germany's Merkel meets Greece PM over debt bailout tensions
As Athens protests, Germany scoffs over Greece debt bailout
Merkel praised in Germany for hard line on Greece debt crisis
Greek debt crisis: Bailout likely, but will it be enough?
Greece bailout: What's the future of the euro?