Merkel ally fuels Greek aid row before election

BERLIN Sat Aug 24, 2013 8:39am EDT

European Energy Commissioner Guenther Oettinger addresses a news conference on the security of energy supply and international cooperation at the EU Commission headquarters, in Brussels September 7, 2011. REUTERS/Thierry Roge

European Energy Commissioner Guenther Oettinger addresses a news conference on the security of energy supply and international cooperation at the EU Commission headquarters, in Brussels September 7, 2011.

Credit: Reuters/Thierry Roge

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BERLIN (Reuters) - Germany's commissioner to the European Commission said on Saturday he expects a new bailout for Greece to amount to a little more than 10 billion euros, fuelling a debate that could hurt Chancellor Angela Merkel in next month's election.

Although Guenther Oettinger, EU Energy Commissioner, does not deal directly with euro zone debt issues, his comments are the most concrete about the likely size of any new bailout from a senior German politician since the issue burst into the election campaign last week.

Finance Minister Wolfgang Schaeuble provoked a storm by saying more explicitly than before that Greece would need a third bailout, going much further than Merkel had done. The government has since sought to play down his remark.

Oettinger, a member of Merkel's conservatives, said he thought another package for Greece would be significantly smaller than the second bailout.

"It will be a manageable sum. I personally expect the figure to be a little over 10 billion euros. The program should cover the years 2014-2016," he told the Welt am Sonntag weekly.

He added that it had not been necessary to bring up the thorny question of Greek aid so soon before the election.

Opposition parties have seized on Schaeuble's comments, saying Merkel has been hiding the risks of more aid before the September 22 election in which she is tipped to win a third term.

As Europe's largest economy, Germany has the biggest exposure to Greece and voters are reluctant to provide more aid. Pollsters say Merkel could lose votes if people think she is being less than open about the Greek risks.

Merkel's conservatives have a lead of at least 15 points over the SPD, but it is unclear whether she will win sufficient votes to continue her center-right coalition with her preferred partners, the Free Democrats (FDP).

Analysts have long predicted Greece will need more aid, albeit on a smaller scale than previous bailouts totaling about 240 billion euros. The IMF estimated last month Greece would face a funding gap of nearly 11 billion euros for 2014-2015.

Merkel and Schaeuble have repeatedly ruled out a debt writedown for Greece, but Oettinger said the possibility should not be excluded forever although it was not a question for now.

In an interview with Wirschaftswoche weekly, Schaeuble reiterated that it was still too early to say what aid might be needed after the current Greek program expires in 2014 but that the possibility of a financing gap had never been hidden.

"Citizens should know that there are no secret plans for after the election and that we are not delaying any decisions in Europe because of an election in Germany," he said.

Schaeuble also said it would be a priority after the election to push through plans to cut income tax which had been blocked by the opposition in the Bundesrat upper house.

Merkel's government has long wanted to stop the effects of "cold progression" under which tax thresholds are not adjusted for inflation. That means workers with pay rises can see their net pay fall because they have entered a higher tax bracket.

(Reporting by Madeline Chambers; Editing by Hugh Lawson)

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