German parliament approves Greek debt deal

Written By Unknown on Jumat, 30 November 2012 | 19.50

GERMAN MPs have overwhelmingly backed a deal aimed at trimming Greece's debt load and keeping the country financially afloat but the country's finance minister insisted it would be irresponsible to raise hopes of more radical debt forgiveness soon.

Parliament voted 473-100 on Friday to back the complex deal reached by European finance ministers on Tuesday after marathon negotiations.

The agreement paves the way for Greece to receive 44 billion euros ($A55 billion) in critical rescue loans, without which the country would face bankruptcy and a possible exit from the euro.

Its measures include a debt buyback program and an interest rate cut on loans. Those are aimed at cutting back Greece's debts and giving it more time to push through economic reforms and trim its budget deficit.

However, it stops short of forgiving outright debt owed to lead creditor Germany and other eurozone governments.

Chancellor Angela Merkel's government has strongly opposed a so-called "haircut" in the run-up to elections next year.

German Finance Minister Wolfgang Schaeuble told MPs that the latest deal will keep the pressure on Greece to fulfill its promises.

"We have always pushed the principle of conditionality, and that goes here too," Schaeuble said.

"Greece will only receive all this relief if it continues to implement its reform measures, one after another."

Germany's parliament has to approve eurozone rescue measures. The bailouts of Greece and others haven't been popular in Germany, and there has been growing unease in Merkel's centre-right coalition.

Still, broad support was assured because two of Germany's three opposition parties voted largely in favour. They argued that Greece had to be kept afloat despite reservations about Merkel's insistence on a step-by-step and austerity-heavy approach to the debt crisis.

Many economists say that Greece's debt burden - forecast to reach some 190 per cent of its gross domestic product next year - can only be managed by writing off loans by governments.

The government argues that full-scale debt relief is legally impossible at present and would send the wrong message.

Some MPs in Merkel's coalition argue that the government's current approach already goes too far.

"We know from our private lives that you don't throw good money after bad," Klaus-Peter Willsch, a backbencher with Merkel's Christian Democrats who has become a prominent critic of her rescue policies, said.

"Let's end this road today."


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