German lawmakers to approve Greek bailout despite unease

Germany's lower house of parliament will approve a fresh bailout for Greece on Friday in a vote seen as a test of Chancellor Angela Merkel's authority over her centre-right coalition less than a year before federal elections.

The outcome of Friday's vote in the Bundestag is not in doubt but unease over the costs of the euro zone debt crisis and over talk of another write-down of Greek debt means the number of coalition lawmakers voting against will be keenly watched.

The package of measures to be approved is aimed at reducing Greece's debt load to 124 percent of gross domestic product (GDP) by 2020. The government acknowledged for the first time this week that the bailout will mean lost federal revenues.

Finance Minister Wolfgang Schaeuble, who will deliver the government's statement in Friday's debate, said he was confident the package would pass comfortably and he defended Berlin's handling of the three-year-old debt crisis.

"We are trying to keep the costs and risks (of aid to Greece) as small as possible. We are just following the old rule of 'step by step'," he told a TV chat show late on Thursday.

Schaeuble said Germany was insisting on strict monitoring of Greece's reforms to ensure it met its fiscal targets but he also said the new conservative government in Athens was finally making headway in tackling the country's fiscal problems.

Echoing that view, Deputy Finance Minister Thomas Steffen told the economic council of Merkel's Christian Democratic Party (CDU) on Thursday evening: "The will for renewal exists (in Greece) ... I believe we have to give the Greeks another chance."

PREDICTIONS

Others are less sanguine. All week, German newspapers have reverberated with predictions, including from some coalition lawmakers, that Germany and other euro zone countries will eventually have to write off some of their Greek debt holdings.

Jens Weidmann, head of Germany's central bank, said on Thursday the latest bailout did not mean the crisis was over.

"If Greece does not implement the agreed reforms and does not manage to put its budget on a solid footing, the effect of the new (aid) measures will evaporate," he said in a speech.

A minority of Merkel's lawmakers will vote against the package but criticism of the Greek bailouts within her coalition has softened in recent months after she decided the cost of expelling Greece from the euro zone would be far greater.

In a test vote on Wednesday, 15 of the 237 lawmakers in Merkel's own conservative bloc voted against the aid package and one abstained - though only about two thirds of lawmakers attended the meeting, participants said.

The Free Democrats, the CDU's junior coalition partner, expect about 10 of their 93 lawmakers to vote against or abstain, said a parliamentary source.

That means Merkel is heading for a bigger rebellion than in a Bundestag vote in July on a rescue package for Spanish banks, which saw 22 rebels from her centre-right coalition.

With the approach of next September's federal elections in Germany, the centre-left opposition is also starting to show greater reluctance to support Merkel's European policies.

The Social Democrats (SPD) and Greens will back the aid package but the SPD's challenger for the chancellorship, Peer Steinbrueck, told German television on Friday: "We will vote for it because we don't want our reliability as European partners left in any doubt. It has nothing to do with the government."

He has accused the Merkel government of deceiving German voters about the true costs of the Greek bailouts but it is difficult for the SPD to make political capital out of the issue as they are strongly pro-euro and support more EU integration.

"Basically they have no choice. If they behave in a way not supportive of the state, they will be berated as unpatriotic knaves," the head of the pollster Forsa, Manfred Guellner, told Spiegel magazine's online edition.

(Additional reporting by Stephen Brown; Editing by Sophie Hares)