Germany Approves Greek Bailout

A significant minority of Merkel’s conservatives may vote against the €86bn bailout, sending the government a warning that the latest package is its last chance to keep debt-ridden Greece in the 19-country euro zone.

Earlier on Wednesday, Germany’s parliament ratified the latest Greek bailout, but a record number of lawmakers in the conservative parties backing Chancellor Angela Merkel rejected the motion, highlighting the political risks the German leader is taking in supporting Greece.

There were 63 anti-bailout votes from the conservative benches, three more than at the last German vote on aid for Greece in July.

The deal comes ahead of a no-confidence vote sought by his own ruling Syriza party, after he broke a vow not to privatise infrastructure in order to secure the €86 billion bailout loan to prevent Greece crashing out the euro zone.

Interrupting their holidays for the second time this summer to cast ballots on a Greek rescue, lawmakers in the Bundestag lower house approved the 86 billion euro ($95 billion) rescue plan by 453 votes to 113. Though not unexpected, the defiance was all the more notable given that Merkel’s parliamentary whip threatened MPs in recent days with reprisals if they refused to toe the party line.

Tsipras has to implement a third austerity bailout that has split his radical left Syriza party, rendering him powerless to push further reform bills through parliament in the fall. The full breakdown of the vote will be available this afternoon.

For all the dissent, approval ratings for Schaeuble and Merkel are among the highest for German politicians.

Schaeuble said, “There is no guarantee that all of this will work and there can always be doubts”.

“I am fairly confident that we (international creditors including the IMF) will reach a joint assessment of (Greece’s) debt sustainability in October”, said Schaeuble, reiterating that a debt haircut is not possible. Tsipras won power only in January and fresh elections would be the third in as many years.

The International Monetary Fund, however, will not give its imprimatur to the deal unless Greece’s debt burden is reduced sufficiently to make it sustainable.

“This agreement provides perspective for the Greek economy and a basis for sustainable growth”, Eurogroup chief Jeroen Dijsselbloem said Wednesday.

The decree, published on Monday, also said bank transactions related, among others, to foreign exchange spot transactions, interbank lending, derivatives trading, rollovers and transactions which did not materially change the liquidity of the credit institution were permitted, and prior authorization was not required. This was a positive sign that lenders are stabilizing their operations and building cash reserves. “When public sector employees get their monthly salary payments, the money does not flow out as before”, he added.