Berlin's part in bailout not a done deal, says Merkel

GERMANY:GERMAN CHANCELLOR Angela Merkel played for time on Greek aid yesterday, saying Berlin's contribution to a bailout was far from a done deal.

With an eye on a crucial state election next month, the chancellor said Germany’s expected € 8.4 billion contribution would take the form of guarantees only, financed by the state KfW bank, and not from the budget directly.

In addition, she said Athens still had to convince the International Monetary Fund, the European Commission and the European Central Bank.

“Only when these steps have been completed can we talk about concrete assistance including what kind of aid and how much,” she said in Berlin yesterday.

Greek austerity plans “have to be credible” for officials to be able to determine “whether this is just a Greek problem or whether this is a problem for the stability of the single currency”.

Finance minister Wolfgang Schäuble said the agreed aid mechanism would only be triggered in a “last resort situation”, and only if there was “clarity about a Greek restructuring programme in the next two years”.

The German government is nervous about the political implications of financial assistance to Greece, to which it would be the largest contributor. Opinion polls show a huge popular resistance to the plan, and voters in Germany’s most populous state, North Rhine Westphalia, could use a May 9th election to vent their frustration with the government if any deal was on the table.

Greek finance minister George Papaconstantinou said yesterday that the first tranche of the bailout would need to be in place by May 19th, when €8.5 billion of its debt falls due, FT Deutschelandreported yesterday.

Already, Dr Merkel's junior coalition partner has admitted that Germany may have to pay as much as € 30 billion to Greece by 2012. "Greece is a bottomless pit," said Frank Schaeffler, financial spokesman of the liberal Free Democrats, to the Bildnewspaper yesterday.

Greece’s call for help yesterday places Dr Merkel in exactly the situation she wanted to avoid. She had hoped the IMF/EU plan would convince markets enough to obviate the need for direct assistance to Greece. Things haven’t worked out that way, giving the opposition parties an issue to run with before next month’s election.