Will German Chancellor Angela Merkel’s Power Base Fracture Over the Greek Bailout?

German Chancellor Angela Merkel got a third bailout for Greece that could split the base of her political power.


German parliament on Wednesday passed an 86 billion euro bailout that Greece needs to stay solvent. It’s the third financial lifeline to Athens and was widely expected to pass. But the prospect of rebellion from German Chancellor Angela Merkel’s base threatens to undermine the eurozone’s most powerful leader.

The last time the Bundestag voted on matters related to Greece, on July 17, 60 members of her coalition abandoned her and voted against the party line. That’s more than double the number of coalition lawmakers who in February voted against the chancellor on extending a second bailout package to Greece. There is now speculation in German media that the number of defectors among Merkel’s coalition could grow as lawmakers consider releasing the first tranche of 13 billion euros, or about $14 billion. On Wednesday, 63 members of Merkel’s coalition voted against the bailout.

The vote has now exposed fault lines within Merkel’s coalition and could upend any semblance of unity ahead of Germany’s 2017 national election.

“It’s really about Merkel’s power base,” Karen Donfried, president of the German Marshall Fund of the United States, told Foreign Policy in an interview Tuesday. “It’s widely thought she wants to run again in 2017. The desire to keep the number of opposing votes low in her party group has a lot more to do with Merkel than it does with Greece.”

Merkel also needs to get the International Monetary Fund to contribute to the bailout, something she has long insisted is a condition for Germany’s participation as the largest donor to Greek’s relief fund. IMF chief Christine Lagarde says Athens needs its debt restructured, but Merkel has ruled out a traditional haircut — a borrower paying back less than what it owes. Lagarde has also suggested extending a grace period of up to 30 years on payments. The IMF now says it will wait until October to see whether Athens makes the spending cuts, pension reforms, and tax increases that Greek Prime Minister Alexis Tsipras has promised.

To overcome this hurdle, the Eurogroup, a panel that’s composed of Europe’s finance ministers and that approved the bailout plan last Friday, is considering giving Greece even more time than the IMF wants. According to reports in European media, the ministers have discussed giving Athens up to 60 years to pay back what it is now borrowing.

That means Athens could have until 2075 — yes, 2075 — to return loans that it would receive to pay back 3.2 billion euros that it already owes the European Central Bank by Aug. 20, as well as future bailout funds. And that, effectively, kicks the Greek-crisis can down the road for future generations of European politicians to resolve.

This kind of maneuvering is fueling dissent from rank-and-file members of Merkel’s coalition, composed of the Christian Democratic Union; the Christian Social Union, its Bavarian sister party; and the Social Democratic Party. Calls to cut off Greece have grown louder since Tsipras failed to pay up on money that was owed to the IMF by June 30 and then called for a referendum that rejected European austerity. He caved to harsher demands weeks later.

“I will not be able to consent,” Hans Michelbach, a lawmaker in Merkel’s coalition, told the German television ZDF on Tuesday. “I am a professional businessman; I can read budgets, and it is clear that we can no longer reach debt sustainability.”

Since the Eurogroup approved the bailout last week, Merkel and her finance minister, Wolfgang Schäuble, have been on a private and public campaign to persuade skeptical lawmakers to get on board. But as the two prepare for Wednesday’s vote, proceedings in Greece have thrown the future of Tsipras’s political reign in doubt.

On Monday, Greek Energy Minister Panos Skourletis said a vote of no confidence on Tsipras’s government is “self-evident” after a third of deputies in the ruling Syriza party voted against the bailout program. Greece’s socialist party, PASOK, also said it would refuse to back Tsipras if such a vote were held. On Tuesday, CNBC reported that the no-confidence vote could come as early as Aug. 20, the day Athens owes the European Central Bank 3.2 billion euros.

If Tsipras can’t survive the no-confidence tally, it raises the prospect of new elections, something Greek Health Minister Panagiotis Kouroumblis suggested Monday.

“Elections are not the best choice … but for the economy to pick up, there must be political stability,” he told Greece’s Skai TV. “To implement such a serious program with painful measures — you cannot do that without a popular mandate.”

If this occurs, reforms that Tsipras has promised in exchange for the third bailout are no longer a sure thing; a new government could decide to do away with them.

According to Frances Coppola, a U.K.-based independent financial analyst who blogs for the Financial Times and appears as a commentator on the BBC, even if Greece hews to proposed changes, that’s no guarantee it would be able to generate enough economic growth to pay back its European creditors.

“There’s this idea, ‘If they only make enough reforms, Greece will magically return to growth,’” she told FP on Tuesday. Coppola said no country facing a financial situation as bad as Greece’s has ever generated enough surpluses to pay back its debt.

The maneuvering now, Donfried of the German Marshall Fund said, appears to merely answer the political dilemma — not the financial crisis. The IMF’s participation is tantamount to Merkel, she said, and “it’s a question of what formula they come up with that checks the box for everyone.”

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