Germany ready to give green light for US$11b aid to Greece
By Melissa Eddy |
April 29, 2010, Thursday
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Print Edition
Print Edition
GERMANY said yesterday it could approve loan aid for Greece as early as May 7 if Athens wraps up its talks with the International Monetary Fund and the European Union quickly enough.
Finance Ministry spokeswoman Jeanette Schwamberger said legislation to free up the German contribution of some 8.4 billion euros (US$11 billion) could get through both houses of parliament within a week.
Germany would be the biggest contributor to a 45 billion euro bailout by other European countries and the IMF. Greece faces a May 19 deadline to pay debts that are coming due and bond markets have been rattled by German delays in saying yes to its part of the bailout.
Markets were looking for reassurance from a meeting yesterday between Chancellor Angela Merkel, the International Monetary Fund Chief Dominique Strauss-Kahn and European Central Bank President Jean-Claude Trichet in Berlin.
The meeting comes a day after Standard & Poor's rating agency downgraded Greek bonds to junk status and lowered Portuguese bonds two notches. The downgrade intensified Europe's spreading government debt crisis in which investors fear governments, with deficits swollen by the global economic turmoil, won't be able to pay what they owe.
The worst fear is that the crisis will spread to other countries with troubled finances such as Spain and Italy that are too large to be bailed out.
Greece has asked for 45 billion euros from the eurozone countries as well as the International Monetary Fund.
The debt downgrade "has sent the bond markets into meltdown and equity investors toward the exits," said Michael Hewson, an analyst with CMC Markets in London.
"It has also served to make the market realize that because of the fear of creating a precedent, even if Greece is bailed out, due to the uncertainty over the final price tag, neither Germany, nor the IMF would have deep enough pockets to bail out Portugal, Spain and other European countries with large deficit problems."
Many Germans oppose the Greek bailout. A poll by Dimap, for German newspaper Die Welt and French broadcaster France 24, showed that 57 percent of Germans thought the aid was a bad decision while just 33 percent favored such a move.
Underscoring the German debate is an important election in Germany's most populous state on May 9. Merkel is coming under pressure from within her own party, the conservative Christian Democratic Union, over her handling of the Greek issue.
In the meantime, stocks sagged and markets sold off Greek bonds with a vengeance. Authorities in Athens halted short-selling of stocks for two months as the Athens stock exchange continued a six-day losing streak yesterday.
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