Merkel mulls easing Greek rescue terms

Aug. 17 (Bloomberg) -- Chancellor Angela Merkel is considering easing Greece’s bailout terms, fanning tensions with members of her coalition who oppose giving the Greek government any more concessions, two German lawmakers said.

Merkel’s government is torn between showing some leniency toward Greece as it struggles to meet the terms of its rescues and insisting that Prime Minister Antonis Samaras deliver on his promises, Klaus-Peter Willsch and Frank Schaeffler, both of whom have voted against Merkel’s euro crisis policies in parliament, said in separate telephone interviews.

“The sensitivities among many more than just the 27 coalition members who voted ‘no’ last time are well known” to Merkel, “so the official line is to stay tough” on Greece, said Willsch, a member of Merkel’s Christian Democratic Union party. “But at the same time, some are being sent forward to test the waters on how this tough line can be abandoned.”

Almost three years after the debt crisis erupted in Greece, Samaras’s government is awaiting a report by its international creditors next month on progress made in meeting bailout goals, an assessment that will determine whether Greece receives the next instalment of aid it needs to stay in the euro. Samaras, whose governing coalition in Athens wants its fiscal adjustment program to be extended by two years to the end of 2016, is due to visit Berlin on Aug. 24 for talks with Merkel.

Samaras Compromise

While it’s too early to rule out that an example will be made of Greece if it fails to adhere to the program terms, Merkel will probably seek a compromise with Samaras that would allow both sides to save face, Schaeffler, a Free Democratic Party lawmaker, said in a telephone interview. The example offered by Spain shows that bailout terms are flexible, he said.

“We’re seeing the softening already in the case of Spain, which was given a ‘bailout deluxe’ rather than a full-fledged program,” Schaeffler said yesterday. “And since Spain will need more money, that program will also be softer than that of the others,” possibly triggering re-negotiation demands in Ireland and Portugal.

Neither Willsch nor Schaeffler mentioned any specific proposals being considered by the chancellery. Norbert Barthle, CDU budget spokesman in parliament, said in a July 25 interview that Greece may need a second debt restructuring to stay in the 17-nation euro region.

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