Declaring that "the future of Europe" is at stake, Chancellor Angela Merkel urged German lawmakers on Wednesday to speedily approve 22.4 billion euros ($29.3 billion) in aid for debt-ridden Greece.
Merkel's Cabinet agreed Monday upon the German contribution to a three-year 110 billion euro bailout by the European Union and International Monetary Fund. As Europe's largest economy, Germany will provide 8.4 billion euros ($10.8 billion) in 2010 and up to 14 billion euros more over 2011 and 2012, according to the plan.
"Nothing less than the future of Europe, and with that the future of Germany in Europe, is at stake," Merkel told lawmakers. "We are at a fork in the road."
Merkel's government had insisted that Greece agree to new austerity measures before Germany committed to financial assistance — a stance that drew criticism of foot-dragging. Merkel had appeared to want to delay action until after a local vote in Germany this Sunday, but ratings agency Standard and Poor downgraded Greek bonds to junk status last week, deepening the crisis.
Amid market turmoil, Athens worked out a new deal with the IMF and the EU over the weekend. Germany moved quickly ahead with its funding for Greece and Merkel fast-tracked the legislation with the goal of having it passed by both houses of parliament by Friday, when she travels to Brussels for an EU meeting on Greece.
Greece needs the funds by May 19 so that it doesn't default on debt payments.
Fallout over Greece's financial situation has hit the euro, the common currency used by Greece and 15 other EU nations. The euro fell below $1.30 this week — compared to about $1.50 last November.
Axel Weber, a member of the European Central Bank's governing council and head of Germany's Bundesbank, warned lawmakers that the financial problems afflicting Greece pose a serious risk of infecting other countries in the eurozone.
There is "a serious threat of contagion effects for other eurozone countries" that could further roil already jittery markets, he told the German parliament's budget committee.
Weber said Germany's contribution to the rescue package was "justifiable" because it would help protect the euro and the eurozone.
Although German opposition parties have expressed reservations about the aid package, and public sentiment is largely against doling out any money to a country seen as being fast and loose with its finances, the legislation is expected to pass swiftly.
"Germany, as the strongest economy in Europe, has a particular responsibility and Germany takes this responsibility earnestly," Merkel said.
The chancellor made clear that, beyond the current Greek bailout, changes are needed to ensure eurozone countries stick to the deficit rules in future.
She called for more effective sanctions, such as depriving countries that run excessive deficits of part of their EU structural funds or farm subsidies; at least temporarily depriving repeat offenders of their voting rights; and procedures allowing for the "orderly insolvency of a member state."
Going ahead with the bailout appears to have hurt Merkel in polls ahead of a regional election this weekend in Germany's most populous state, North Rhine-Westphalia.
Only 41 percent of Germans believe Merkel has handled the crisis well — as opposed to 48 percent who say she has handled it "not so well" or badly, according to a poll conducted April 29-30 by the Forsa group for Stern magazine.
A poll conducted April 26-30 by Forsa found a small drop in national support for Merkel's conservative party, which declined two points compared with a week earlier to 34 percent. Both polls had a margin of error of plus or minus 2.5 percentage points.
In parliament, Merkel praised Germany's banks for expressing their willingness to step in and help with the bailout — comments that came Tuesday after leading bank executives met with Finance Minister Wolfgang Schaeuble. However, it remains unclear how much they might contribute.
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