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29th May 2022

Bundestag to approve Greek aid despite 'hidden cost' row

  • The German opposition will vote in favour of the Greece deal after attempts to postpone it (Photo: Deutscher Bundestag/Lichtblick/Achim Melde)

A majority of German MPs on Friday (30 November) is expected to approve the adjustments to the Greek bailout and the €44 billion tranche of bailout money Athens has been expecting since June.

The Social Democrats on Thursday decided to vote in favour, in order to avoid Greece going bankrupt. But they remain sceptical that the measures agreed by finance ministers earlier this week will be enough to keep Greece afloat.

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The long-fought deal opposing German finance minister Wolfgang Schaeuble to International Monetary Fund chief Christine Lagarde, who was pressing for eurozone governments to accept losses on their Greek loans, saw a breakthrough only after three consecutive meetings. Schaeuble's only concession was for the eurozone to "reconsider" the option of a so-called haircut in 2016, when the Greek budget is projected to return to a surplus.

Legal restrictions make it impossible for the German government to give loan guarantees to a country and at the same time acknowledge that the loans will not be fully paid back, Schaeuble argued.

But to German opposition politicians, this delaying tactic is motivated solely by the government's fear of confronting voters with the Greek bill before general elections next year.

"It is only a matter of time. Already today it is clear that Greece will not be able to pay back its debt," Carsten Schneider, the SPD's finance expert, said after his group's meeting.

German central bank chief Jens Weidmann on Thursday also pointed out that what finance ministers have agreed earlier in the week - a debt-buyback scheme and eurozone governments returning about €10 billion worth of profits from the Greek loans over the next decades - is only buying some time, but not solving the debt problem.

"Monday's decisions have avoided a debt restructuring for the moment," Weidmann said in a speech in Berlin.

Within Merkel's own coalition the number of backbenchers rejecting any bailout-linked decisions is growing. A head count on Wednesday night in the CDU/CSU parliamentary group already had 15 say they would vote No.

In the most recent flip-flop, Schaeuble last week during a budget debate in the Bundestag vowed that there will be "no cost" at all for the German taxpayer from the Greek deal. This week, he conceded in a paper sent to the SPD that the German budget will lose some €2.7 billion over the next decades as part of the €10 billion in profits on the Greek loans that the European Central Bank has agreed to give back to Greece.

Speaking to foreign journalists on Thursday, Free University Berlin researcher Gero Neugebauer said that "Merkel's credibility is crumbling away with all these demands from the opposition to tell the truth."

"The euro-crisis and its domestic impact, particularly on the budget, will certainly be a topic for the campaign. People may slowly get used to more money flowing away, as long as it does not have too large an impact on investments, social projects here. But if the crisis worsens and the impact on the German budget grows, this can harm Merkel," Neugebauer said.

Wolfgang Munchau, a well-respected commentator meanwhile wrote in Der Spiegel that Merkel's "sausage-slicing" method is too costly and the opposition should stop backing it.

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