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Page last updated at 08:53 GMT, Wednesday, 5 May 2010 09:53 UK

Merkel urges Germany to support Greece with bail-out

German Chancellor Angela Merkel, 5 May 10
Chancellor Merkel demanded tough action by Greece in exchange for loans

Chancellor Angela Merkel has urged the German parliament to back the EU's emergency loan package for Greece.

"Quite simply Europe's future is at stake," Ms Merkel said. "Europe is at a fork in the road."

Parliamentary approval is needed for the EU and IMF to start disbursing the 110bn-euro ($143bn; £95bn) bail-out.

The rescue is conditional on Greece cutting public sector wages and pensions and boosting tax receipts. It risks defaulting on its huge debts.

The German parliament will vote on the bail-out package on Friday. It has already been approved by the German government.

Some opposition deputies shouted out protests as Ms Merkel defended her position.

Opposition Social Democrat (SPD) leader Frank-Walter Steinmeier accused her of poor crisis management and refused to commit the SPD to the Greek bail-out.

Greece is gripped by a general strike as protests against the tough austerity measures continue.

Eurozone cautious

Under the bail-out agreed on Sunday, Greece's 15 partners in the eurozone will lend it 80bn euro spread over three years and the International Monetary Fund will lend 30bn euro.

What went wrong in Greece?

An old drachma note and a euro note
Greece's economic reforms that led to it abandoning the drachma as its currency in favour of the euro in 2002 made it easier for the country to borrow money.
The opening ceremony at the Athens Olympics
Greece went on a debt-funded spending spree, including high-profile projects such as the 2004 Athens Olympics, which went well over budget.
A defunct restaurant for sale in central Athens
It was hit by the downturn, which meant it had to spend more on benefits and received less in taxes. There were also doubts about the accuracy of its economic statistics.
A man with a bag of coins walks past the headquarters of the Bank of Greece
Greece's economic problems meant lenders started charging higher interest rates to lend it money and widespread tax evasion also hit the government's coffers.
Workers in a rally led by the PAME union in Athens on 22 April 2010
There have been demonstrations against the government's austerity measures to deal with its 300bn euro (267bn) debt, such as cuts to public sector pay.
Greek Prime Minister George Papandreou at an EU summit in Brussels on 26 March 2010
Now the government is having to access a 110bn euro (95bn; $146.2bn) bail-out package from the European Union and International Monetary Fund.
Greece's problems have made investors nervous, which has made it more expensive for other European countries such as Portugal to borrow money.
Greece's problems have made investors nervous, which has made it more expensive for other European countries such as Portugal to borrow money.
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Germany's contribution has been set at 22.4bn euro, including 8.4bn euro this year.

Eurozone leaders will hold a special summit on Greece this Friday, where they are expected to give formal approval to the bail-out deal.

But Slovakia's Prime Minister Robert Fico warned that "we can't give Greece any loan before we see them doing their homework".

Slovakia's parliament is not likely to vote on the Slovak contribution - about 800m euro - until next month.

The European Commission insists that the bail-out cannot be blocked now. A Commission spokesman on economic affairs, Amadeu Altafaj, said "there is already a political decision by the Eurogroup to activate the mechanism" - a reference to the eurozone finance ministers' agreement.

German Finance Minister Wolfgang Schaeuble had some tough words for Greece on Tuesday, saying "every three months, Greece's government must give a comprehensive report to the European Commission and the IMF about how it is implementing its plan".

"If there are any violations, payments will be stopped. Then Athens will once again be threatened with bankruptcy," he warned.

In her speech to the Bundestag (lower house) Ms Merkel also called for an overhaul of the EU's Growth and Stability Pact, which sets rules for member states' budget deficits and debt. Greece's budget crisis had highlighted the need for reform of the pact, she said.

She said countries "notorious" for breaching deficit targets should lose voting rights. The EU should also consider cutting their structural funds or agricultural subsidies in such cases, she said.



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FROM OTHER NEWS SITES
Reuters UK Greece vows to "walk alone" - 3 hrs ago
AFP via Yahoo! Greece to back austerity, anxious markets eye ECB - 9 hrs ago
Motley Fool UK What Greece Means To Your Portfolio Now - 11 hrs ago
The Sun Firebombs fury over debt crisis - 18 hrs ago
Scottish Sun Firebombs fury over debt crisis 0:15 - 19 hrs ago


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