Germany prepares legislation for contribution to Greek financial aid package

Germany prepares legislation for Greek aid package

BERLIN — German Finance Minister Wolfgang Schaeuble was meeting Monday with leading lawmakers from all parties as the government began to lay the legal groundwork for its contribution to the financial aid package for debt-laden Greece, amid criticism from European partners about Berlin’s reluctance.

Following Schaeuble’s meeting to discuss how to proceed with the necessary legislation, Chancellor Angela Merkel’s office said she would make a statement at 1300 GMT (8 a.m. EST).

Greece said Friday it would ask for a joint euro zone-International Monetary Fund financial rescue package worth some $50 billion — a move that has the German public concerned that their tax money is used to bail out another country.

Merkel stressed Friday that Germany would not do things hastily, but instead wait for the European Union’s and the IMF’s recommendations before freeing the loan package for Greece.

Schaeuble has said that any German commitment to loan guarantees for Greece will need parliamentary approval.

Germany would be the biggest contributor of loans: €8.37 billion ($11.2 billion) as the country holds 27.92 percent of the shares of the European Central Bank.

German lawmakers have been hesitant to embrace the deal because the country’s most populous state, North Rhine-Westphalia, will elect a new state parliament on May 9 and the government is trying to delay the decision for the highly unpopular financial aid package until afterward.

With the future of the rescue package still uncertain, Greece’s borrowing costs have been soaring.

The gap between Greek and benchmark German 10-year bond yields reached a record 6.21 percent Monday, which translates to a borrowing cost of more than nine percent.

This means that were the government to try to raise money on the markets, it would have to offer interest approaching 10 percent — three times what economic powerhouse Germany pays.

In Italy, Foreign Minister Franco Frattini urged Germany to move ahead with approving the loan guarantees.

“I’m worried about a certain inflexibility that Germany has shown, but on the other hand it’s necessary for Greece to take a credible step,” Italian Foreign Minister Franco Frattini said, according to the ANSA news agency.

“From our point of view, we mustn’t have doubts,” Frattini said. “If the common house is in difficulty, we must save the walls because we are all in this common house together,” he said in Luxembourg.

“What’s needed is for both parties to take a step forward,” Frattini added, according to ANSA. Frattini said that “if a domino effect is set off, it is impossible to know where it will end.”

On Friday, Italian Finance Minister Giulio Tremonti already urged Germany to show leadership on the Greek crisis, warning the “fire” coming from Greece easily could spread across Europe, even to “beautiful palaces, with many floors. I’m talking about Germany,” Tremonti said in Washington.

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Associated Press Writers Juergen Baetz in Berlin, Alessandra Rizzo in Rome and Elena Becatoros in Athens contributed to this report.