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17Jul15

Back Greek talks or face chaos, Merkel tells German lawmakers

Chancellor Angela Merkel called on German lawmakers on Friday to back negotiations for a third Greek bailout, saying the alternative was chaos and that suggestions Athens might leave the euro temporarily wouldn't work.

Merkel was addressing parliament, which is expected to give its clear backing for the euro zone to start talks on the new aid program, even though Finance Minister Wolfgang Schaeuble has questioned whether it will succeed.

Schaeuble himself has suggested Greece might be better off taking a "time-out" from the euro zone to sort out its daunting economic problems.

But Merkel argued strongly for negotiating a new deal with Greece to prevent the country's exit from the euro - the "Grexit" that might undermine the entire currency union.

"The alternative to this agreement would not be a 'time-out' from the euro ... but rather predictable chaos," Merkel told the Bundestag lower house. "We would be grossly negligent, and act irresponsibly, if we didn't at least attempt this way."

Popular misgivings run deep in Germany, the euro zone country which has contributed most to Greece's two bailouts since 2010, about funneling yet more aid to Athens.

But Merkel expressed scepticism that a temporary Greek departure from the common currency would solve the problem, saying neither Greece nor the other 18 euro zone member countries were willing to accept the idea. "Therefore this way was not viable," she said.

Nevertheless Merkel thanked Schaeuble - her most powerful ally - for his work in the long, grueling talks which produced the new bailout plan last week. Lawmakers gave him resounding applause. Schaeuble nodded and gave a wry smile.

Lawmakers from Merkel's conservatives and her junior coalition partners, the Social Democrats, already voted overwhelmingly in favor of the euro zone opening talks with Athens in test ballots held on Thursday.

These results indicate that Merkel is likely to get the mandate she needs from the Bundestag, with some opposition parties also expected to vote 'Yes' at the end of the debate.

Seven Reasons

That view is far from unanimous across the nation.

"Seven reasons why the Bundestag should vote 'No' today," ran a headline in the mass-selling Bild daily, listing 'Grexit is the better solution' and 'our grandchildren will pay' among its reasons.

The Greek parliament approved the new bailout offer in the early hours of Thursday and later in the day the European Central Bank increased emergency funding to keep the country's banks from collapse.

European Union finance ministers also approved 7 billion euros in bridge loans to Greece, allowing it to avoid defaulting on a bond payment to the ECB next Monday and clear its arrears with the IMF. These moves have lowered the risk of "Grexit", at least for the time being.

With Merkel under domestic pressure from lawmakers who have lost trust in Greece, the country's creditors agreed the tough deal at the weekend demanding that Athens cut pensions, raise value-added tax, and set aside 50 billion euros ($54 billion) of state assets to sell off.

Germany secured the terms it had pressed for. Nevertheless, Schaeuble repeated on Thursday the suggestion he made in the weekend negotiations that Greece might be better off temporarily leaving the euro zone - a view that resonates with some of his fellow conservatives.

Conservative lawmaker Mark Helfrich told Deutschlandfunk radio he would vote 'No', adding: "This is about ruined trust."

In a sign of frustration with Athens, 48 conservatives in Thursday's test vote opposed new negotiations, according to participants.

Anton Hofreiter, a leader of the opposition Greens, said he expected a majority of his party to abstain. "I won't vote 'no' because I think Greece definitely needs a bailout and we need to keep Greece in the euro zone," he said.

"But I, and a large majority of the fraction, do not have confidence in the German government to act in a way that will prevent a Grexit," he added.

[Source: By Paul Carrel, Reuters, Berlin, 17Jul15]
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