German lawmakers gave their go ahead yesterday for the eurozone to negotiate a third bailout for Greece, heeding a warning from Chancellor Angela Merkel that the alternative to a deal with Athens was chaos.
The Bundestag lower house of parliament, whose backing is essential for the talks to start, decisively approved the move by 439 votes to 119, with 40 abstentions. But almost a fifth of Merkel’s conservatives voted ‘no’ in a blow to the Chancellor.
Popular misgivings run deep in Germany, the eurozone country which has already contributed most to Greece’s two bailouts since 2010, about funnelling yet more aid to Athens.
Finance Minister Wolfgang Schäeuble has questioned whether a new programme will succeed, although the creditors’ offer to Athens includes the conditions for more austerity and economic reform that Berlin had demanded. But Merkel argued for negotiating a new deal to prevent a Greek exit from the euro - the ‘Grexit’ that might undermine the entire currency union - and said suggestions Athens might temporarily leave the euro wouldn’t work.
The alternative to this agreement would be predictable chaos
“The alternative to this agreement would not be a ‘time-out’ from the euro... but rather predictable chaos,” she told the Bundestag. “We would be grossly negligent, and act irresponsibly, if we didn’t at least attempt this way.”
Schäeuble himself has suggested that Greece might be better off taking such a time-out from the eurozone to sort out its daunting economic problems. But Merkel said neither Greece nor the other 18 eurozone member countries were willing to accept the idea. “Therefore this way was not viable,” she added.
Schäeuble lined up with his boss and urged lawmakers to vote to start the negotiations, adding: “It’s a last attempt to fulfil this extraordinarily difficult task.”
Not all conservatives agreed. A total of 60 voted against starting negotiations, more than double the number of rebels in a February vote on extending a second bailout package. The jump highlighted grassroots opposition to granting further aid.
Meanwhile also yesterday the European Stability Mechanism, the eurozone’s bailout fund, decided formally to open negotiations with Greece on a third bailout programme that could total €86 billion over three years, the fund said in a statement.
The decision ends a stormy week of negotiations, organising bridge financing by the eurozone and rushing through of reforms by the Greek parliament to avoid a Greek default on the European Central Bank on Monday, July 20.
The chairman of eurozone finance ministers Jeroen Dijsselbloem expects negotiations on the third bailout for Greece to take four weeks.
EU officials hope the bailout deal will be in place by mid-August when Greece needs to make further payments to the ECB to redeem its maturing debt, because the bridge financing organised so far is only €7.16 billion – enough to see Athens through July, but not through August.
The bridge loan will come from the European Financial Stability Mechanism – a bailout fund operated by all 28 EU governments, not just eurozone members like the ESM.