UPDATE 3-Germany’s coalition moves to back Portugal bailout

* Merkel’s finance minister sees “sensible” step by Portugal

* Conservative whip predicts broad German support

* Sometimes eurosceptic Merkel allies say in favour

(Adds Irish, Spanish and Dutch comments)

By Stephen Brown and Andreas Rinke

BERLIN, April 7 (Reuters) – Germany threw its weight behind
Portugal’s request for financial help from the European Union on
Thursday with Chancellor Angela Merkel’s conservatives and their
sometimes eurosceptic allies looking likely to back such a deal.

Finance Minister Wolfgang Schaeuble, mindful of the concerns
among taxpayers in affluent Germany already bearing the brunt of
existing bailouts for Greece and Ireland, pointed out that such
aid could only be granted in return for tough reforms.

Calling it a “sensible and necessary step”, Schaeuble said
in a statement that within the current bailout mechanism, aid
was only available in return for “an adjustment programme”.

But crucially the first signals from members of Merkel’s
coalition were positive for Lisbon, including from her junior
partners, the Free Democrats (FDP), who sometimes talk tough on
bailouts to shore up their flagging popularity at home.

Senior FDP figures including Volker Wissing, who heads the
German parliament’s finance committee, welcomed Portugal taking
a step that has long been widely considered inevitable.

“We’re relieved that Portugal is now seeking aid and thus
sending a signal that will calm markets,” said Wissing.

Portugal’s aid request was closely watched across Europe,
especially in countries that have either already sought help —
Greece and Ireland — or see it as a risk, such as Spain.

Irish Deputy Prime Minister Eamon Gilmore told parliament in
Dublin that Portugal’s situation “underlines the extent to which
the problem has a European dimension”.

In Spain’s El Pais daily, an editorial headlined “the final
rescue” hoped Portugal’s rescue would draw a line under the euro
crisis. The business daily Expansion said Portugal’s inability
to grow economically was similar to that of Spain.

LIVING BEYOND MEANS?

Dire warnings about the euro zone turning into a so-called
“transfer union”, where Germany with its vibrant economy and
deep pockets has to fund the debts of spendthrift peripheral
European states, get a receptive audience in Germany.

Hans-Werner Sinn, head of the influential Ifo economic
think-tank, was quoted in the top-selling daily Bild warning:
“The more money flows, the longer the indebted countries are
going to live beyond their means, the more money is lost.”

However, Werner Hoyer, Germany’s FDP deputy foreign
minister, told Reuters Portugal’s decision had averted a “very
dangerous” threat for the country and the euro zone, saying
market reactions showed there was “no risk of a chain reaction”.

Such comments backed the view of Merkel’s parliamentary
leader Peter Altmaier that bailing out Portugal was “the best
solution in the circumstances” and should get “unanimous and
cross-party support in parliament”.

“We have in the course of the past year made clear under
what conditions this help will be offered, meaning that when you
get help you must in return sort out your finances, save, and
rebuild your competitiveness,” Altmaier told Reuters.

“These are always tough decisions but they are unavoidable
because we want to ensure this aid makes it possible to have a
sustainable Portuguese economic recovery.”

The Dutch government, closely aligned with Germany on euro
matters, also stressed that any Portuguese aid would “come under
the strict rules of the IMF and the European emergency fund”,
Finance Minister Jan Kees de Jager told ANP news agency.

Merkel’s whip Altmaier, asked about the eurosceptic comments
of some FDP leaders on bailouts, said the strict terms agreed
for the existing European Financial Stability Facility and the
European Stability Mechanism that succeeds it in 2013 meant that
“in the end, the coalition will act in a united fashion”.

“The CDU/CSU and FDP have always been Germany’s pro-European
parties for the last 60 years,” Altmaier said in an interview.

But with the FDP in turmoil after Foreign Minister Guido
Westerwelle quit as party leader, some conservatives wonder
whether his 38-year-old successor, Health Minister Philipp
Roesler, has the power to keep the rest of the party in line.

UPDATE 3-Germany’s coalition moves to back Portugal bailout