Germany must veto Greek aid if haircut risk: Merkel ally

BERLIN Tue Nov 27, 2012 8:41am EST

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BERLIN (Reuters) - The German parliament cannot approve a new aid deal for Greece this week if lawmakers determine that it might pave the way for future losses on government loans to Athens, a senior parliamentarian from Chancellor Angela Merkel's party said.

Michael Meister, a deputy leader of the Christian Democrats (CDU) in the Bundestag lower house, told Reuters he expected the government to explain all aspects of the Greek deal that may not be fully clear, including the promise to take additional steps to reduce Greece's debt mountain at a future date.

That commitment, made by euro zone finance ministers after overnight talks in Brussels, is the most explicit acknowledgement to date that European governments may at some point have to accept losses on their loans to Greece.

Berlin has said a so-called public sector "haircut" would be illegal under German law, although Finance Minister Wolfgang Schaeuble conceded on Tuesday that it might be acceptable if Greece's budget had returned to a sustainable primary surplus.

"I do not see a public sector haircut as being part of this deal. If this were the case, then the Bundestag would have to decide ... not to approve the next tranche of aid," Meister said, shortly before Schaeuble briefed reporters in Berlin.

"If you are offering a guarantee or credit and you determine that the guarantee will be taken up or the credit will not be fully paid back, then you can't offer it in the first place," Meister added.

"I don't expect this position to change in 2016, or later than that. Otherwise we will have to decide not to pay out the funds to Greece," he added.

Meister made clear that he expected a broad majority to vote in favor of the Greek aid deal in the lower house of parliament later this week, in part because opposition leaders have already made clear they do not want to see Greece go bankrupt.

But by ruling out future losses on government loans to Greece, he and his colleagues in the Bundestag may be headed for a clash with the government, which now appears to have opened the door to a "haircut" at a future date.

Schaeuble is expected to brief the parliamentary groups on the Greek deal on Tuesday and Meister said he expected the government to present the details of the agreement in written form.

(Reporting by Noah Barkin, editing by Gareth Jones)

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