UPDATE 1-Merkel links Europe’s future to Greek aid plan

* Merkel urges tougher sanctions for deficit sinners

* Opposition accuse Merkel of damaging Germany’s reputation

(Adds quotes, details)

By Dave Graham

BERLIN, May 5 (BestGrowthStock) – An international rescue plan for
debt-stricken Greece must succeed or other European countries
may suffer the same fate, threatening the bloc’s future, German
Chancellor Angela Merkel said on Wednesday.

In an impassioned speech to the Bundestag lower house of
parliament, Merkel said Germany was now convinced of the need to
bail out Greece and confident the Greek government would carry
out the swingeing cuts it had pledged to tackle its deficit.

“We’re at a fork in the road,” Merkel told the assembled
lawmakers. “This is about nothing less than the future of Europe
— and with it the future of Germany in Europe.”

“There is no alternative to the aid to be agreed for Greece
if we want to secure the financial stability of the euro area.”

“It must come to avoid a chain reaction in the European and
international financial system and the risk of contagion of
other euro member states,” she added.

At the weekend, officials from the European Union and
International Monetary Fund (IMF) revealed details of a
110-billion euro ($147 billion), three year aid package
conditional on strict austerity measures that have led to mass
protests in Greece.

“Europe today is looking to Germany. Without us, or against
us, there cannot or will not be a decision that is economically
sustainable,” she said to a Bundestag session in which she was
regularly interrupted by shouts from opposition lawmakers.

Facing massive public opposition to a bailout for Greece,
Merkel had long resisted committing to a rescue package, arguing
that only through tough negotiations could the necessary steps
to correct the Greek deficit be reached.

OPPOSITION ATTACKS

Frank-Walter Steinmeier, head of the opposition Social
Democrats (SPD) in the Bundestag, accused Merkel of
procrastinating to the detriment of Germany’s standing in
Europe.

“No German government has managed to throw away so much
respect and confidence as you have in such a short time.”

“Where was the leadership? Where was the crisis management
Mrs Merkel? We saw nothing,” Steinmeier said.

“What we are experiencing here … is not a Greece crisis,
it is a bit more than that, it is the biggest test for European
integration since the Treaties of Rome.”

The chancellor has sought cross-party support on a
parliamentary vote for Greek aid due on Friday, but Steinmeier
left it open as to whether the SPD would provide it.

Merkel said Europe would have to tighten its budgetary rules
in future to prevent other countries going the way of Greece.

“Those that don’t meet the Maastricht criteria then forfeit
a part of their structural funds or agricultural funds. And that
means in the case of long-running deficit sinners, the
withdrawal of voting rights, at least temporarily,” she said.

“For the most extreme situations, a procedure for an orderly
insolvency must also be developed,” she added.

The chancellor added she was glad German banks had pledged
to help Greece, adding it was vital they keep credit lines open
until 2012, when the aid package is due to expire.

Stock Market News

(Additional reporting by Brian Rohan and Madeline Chambers)

UPDATE 1-Merkel links Europe’s future to Greek aid plan