Berlin. German lawmakers gave their go-ahead on Friday for the euro zone to negotiate a third bailout for Greece, but a warning from Chancellor Angela Merkel that the alternative was chaos failed to prevent a hefty rebellion in her own party.

The Bundestag, the lower house of parliament, whose backing was essential for the talks to start, decisively approved the move by 439 votes to 119, but almost a fifth of Merkel’s conservatives voted ‘No.’

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

Merkel’s finance minister, Wolfgang Schaeuble, had suggested that Greece might be better off taking a time-out from the euro zone to sort out its daunting economic problems, although the creditors’ offer to Athens includes the conditions for more austerity and economic reform that Berlin had demanded.

But Merkel argued for a new deal to be negotiated to prevent a Greek exit from the euro that might undermine the entire currency union, and said neither Greece nor the other 18 euro zone member countries were willing to accept a suspension.

“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 acting irresponsibly, if we didn’t at least attempt this way.”

‘Last attempt’

Schaeuble 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.”

Although a bridge loan was put in place on Thursday to tide Greece over a payment due to the European Central Bank on July 20, time is short to agree the actions required of Athens to allow its next bailout to be ready before a further payment falls due in mid-August.

The European Stability Mechanism, the euro zone’s bailout fund, promptly decided on Friday to formally open negotiations on a third bailout program, which could total 86 billion euros ($93 billion) over three years.

The chairman of euro zone finance ministers, Jeroen Dijsselbloem, had said he expected the negotiations to take four weeks.

“It’s not going to be easy. We are certain to encounter problems in the years to come. But I believe we will be able to resolve them,” he said in a statement.

Greece’s left-wing prime minister, Alexis Tsipras, has been forced to accept a host of austerity measures that he promised to oppose when he was elected in January, in order to keep Greece in the euro zone.

Having secured parliamentary approval with opposition support on Thursday for pension cuts, tax increases and a sell-off of state assets, on Friday he sacked the ministers among the 39 hardline Syriza lawmakers who refused to back him.

Banks kept afloat

Energy Minister Panagiotis Lafazanis and two deputy ministers were removed from their posts, but the main economic portfolios were unchanged, with Euclid Tsakalotos remaining finance minister and George Stathakis economy minister.

Greek parliamentary approval had opened the way for the European Central Bank to increase emergency funding to keep the country’s banks, already shut for three weeks, from collapse. It is still not clear if they will be able to reopen next week.

Merkel for her part saw a total of 60 of her conservatives vote against starting negotiations on a third bailout, more than twice the number who in February opposed extending the previous bailout package.

“If we don’t have the courage to end it — Greece won’t make it in the euro zone — there will be a fourth and a fifth bailout for Greece,” said conservative Eurosceptic Klaus-Peter Willsch, reflecting growing popular resentment of Greece among Germans.

The mass-selling daily Bild ran the headline “Seven reasons why the Bundestag should vote ‘No’ today,” listing “Grexit is the better solution” and “Our grandchildren will pay” among its reasons.

However, a Forsa opinion poll indicated that 53 percent of German voters had wanted parliament to back the negotiations, with 42 percent against.

Reuters

The post German Lawmakers Back Greek Bailout Despite Rebellion appeared first on The Jakarta Globe.

German Finance Minister Wolfgang Schaeuble pauses during an interview with Reuters at the finance ministry in Berlin, May 20, 2015. (Reuters Photo/Fabrizio Bensch)

Dresden, Germany. Little more than a gentlemen’s club in recent years, G7 finance ministers and central bankers have their work cut out this week to revive stuttering global growth and defuse tensions over China’s claims to economic power.

Topping the agenda for the finance chiefs from the Group of Seven industrial nations is how to keep a faltering global recovery on track as the threat of a Greek default, rising oil prices and bond market turmoil fuel investor nervousness.

The United States is likely to use the talks, beginning late on Wednesday and running through to Friday, as an opportunity to press Europe to reach a funding-for-reforms deal with Greece, an official close to the discussions said.

“I would expect the Americans to put pressure on the Europeans in Dresden about Greece,” the official said.

“The Americans are stressing the geopolitical risks and telling us we have to find a solution, that we cannot really put the euro area and Europe at risk because of Greece.”

Hosts Germany have given the meeting in Dresden the heading “Towards a Dynamic Global Economy”, but they and officials from the United States, Japan, Canada, France, Italy and Britain must also grapple with the rise of a power not even present: China.

German Finance Minister Wolfgang Schaeuble told Reuters last week that officials could talk informally at the meeting about the increased importance of the Chinese yuan.

The inclusion of the yuan in the International Monetary Fund’s currency basket would mark another stage in China’s rise as a global economic player, requiring the United States to accept a dilution of its power in international finance.

Soft power

Having ignored US urgings not to sign up to a China-led development bank, European G7 members have signaled an openness to add the yuan this year to the basket of currencies makes up the IMF’s Special Drawing Rights (SDR) — a virtual currency that defines the value of IMF reserves, used for lending to countries in financial difficulty.

The United States and Japan are again more cautious.

Including the yuan in the basket would increase China’s influence at the IMF — an institution Washington was instrumental in designing and through which it has projected ‘soft power’ for the last 70 years.

The yuan, also known as the renminbi, is already the world’s fifth most-used trade currency. Beijing has made strides this year in introducing the infrastructure needed to float it freely on global capital markets.

A senior US Treasury official said on Tuesday China’s currency liberalization plans were welcome and would be needed before the yuan was able to join the IMF currency basket.

While the Europeans are vying for commercial advantage in the world’s second biggest economy, Washington sees Beijing also as a strategic challenger that may not feel bound by rules written by the West.

Greece, which is scrambling to strike a deal with its international lenders before an IMF loan falls due on June 5, poses a more pressing problem.

A senior US Treasury official said Washington would emphasize the need to find a pragmatic solution. Failure could have unpredictable consequences for the European and even global economies, said the official, who spoke on condition of anonymity.

Reuters

The post G7 Finance Chiefs Meet With Growth Problem to Fix appeared first on The Jakarta Globe.