Merkel mulls easing Greek rescue terms

Conflicting Signals

German officials have sent conflicting signals on Greece in the past month as the so-called troika of the European Central Bank, the European Commission and the International Monetary Fund assesses Greek progress.

“If the troika says the situation there is not in order, then there can be no money,” Michael Fuchs, a deputy CDU parliamentary leader, told reporters in Berlin today. “Greece must stick to its agreements. It’s as simple as that.”

That contrasts with Michael Meister, another CDU deputy leader, who said in an Aug. 7 interview that Germany has “a certain flexibility” toward Greece. Foreign Minister Guido Westerwelle, of Merkel’s FDP coalition partner, told this week’s Spiegel magazine that time lost during two election campaigns in Greece must be taken into account in any easing of rescue terms.

“Everything can be put on the table,” Steffen Seibert, chief German government spokesman, told reporters on Aug. 15, referring to Merkel’s meeting with Samaras next week. All agree that a third Greek bailout would have trouble gaining approval in the lower house, or Bundestag.

Merkel ‘Committed’

Merkel, speaking in Canada yesterday, said that euro-area policy makers “feel committed to do everything we can to maintain the common currency.”

Easing Greece’s bailout terms would make it difficult for Germany to maintain pressure on countries to carry out the reforms Germany sees as necessary, Willsch and Schaeffler said. A Greek default would be manageable and “could be an example for the others to see what can happen if the treaties are violated,” Willsch said.

Both Willsch and Schaeffler have consistently refused to back Merkel’s line on the euro crisis. They voted against the temporary euro-area rescue fund, its permanent replacement and Greece’s second bailout in separate Bundestag votes.

“As long as the government isn’t ready to question the composition of the euro zone, there is no other choice” than to save Greece, said Willsch. “That, at the same time, is the source of the failure of these rescue policies. If you impose conditions, monitor them, realize they’ve been violated and shy away from drawing the consequences, you have a blunt sword.”

Bloomberg News

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