Germany’s Merkel will try to keep Greece a one-off

By Dave Graham

BERLIN (BestGrowthStock) – Facing domestic opposition to a Greek rescue, German Chancellor Angela Merkel will push hard to ensure Greece’s appeal for financial aid from the International Monetary Fund and the euro zone remains a one-off.

Greek Prime Minister George Papandreou’s call for help out of Greece’s debt crisis puts pressure on Merkel, who has sought to delay any financial support until the last minute. According to people familiar with the plans, conditions for the bailout are largely set in stone for 2010, but it is not clear how aid could work from next year or for other nations.

* Merkel may have to back the aid ahead of a key regional test of her popularity on May 9, when voters go to the polls in North Rhine-Westphalia. If Merkel’s center-right coalition fails to hold Germany’s most populous state, it will lose its majority in the upper house of parliament, threatening plans to cut taxes and reform the health service.

* However, despite threatening to slow down the approval process, the main opposition Social Democrats are unlikely to benefit from the situation as they have signaled their support for Greek aid.

* To discourage other heavily indebted nations from following Greece’s lead, Merkel may seek to ensure the Greek deal does not become a template for future rescues, and she is likely to maintain a tough stance on any subsequent support.

* The chancellor will try to remain as vague as possible on specific aid commitments, although her resistance to issuing checks to Athens is already well documented.

* Wary of losing its influence on European policy, Merkel’s government will probably step up efforts to tighten budgetary discipline inside the euro zone to avoid future crises.

* Greece’s woes and Germany’s principled stand may therefore push the euro zone onto a path of greater austerity in spite of resistance to budgetary consolidation by countries like France.

* Germany may also take a more critical view of applications to join the euro zone, lest Greece’s woes be repeated. This could affect ties with its eastern neighbor Poland.

* Merkel’s stand is unlikely to undermine her position at home because, despite public skepticism about the bailout, the main political parties remain overwhelmingly pro-European.

* Germany’s own budget concerns, due in large part to a shrinking and aging population, mean Merkel may, publicly at least, adopt a more nationalistic tone to placate voters.

* A change in tone is unlikely to translate into a marked shift in German policy, but may stiffen resistance on the right to Turkey’s efforts to join the European Union.

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(Writing by Dave Graham, Editing by Lin Noueihed)

Germany’s Merkel will try to keep Greece a one-off