May 3, 2010 / 10:32 AM / 8 years ago

German SPD ups pressure on Merkel over Greek aid

* German cabinet due to approve Greek aid on Monday

* Merkel seeks cross-party support for Fri parliament vote

* Merkel attacked for hesitating, boosting cost of bailout

By Madeline Chambers

BERLIN, May 3 (Reuters) - Germany’s opposition Social Democrats (SPD) will back Berlin’s contribution to a Greek rescue only if Chancellor Angela Merkel commits to doing more to fight market speculators, a senior party member said on Monday.

Merkel’s cabinet is due later on Monday to approve Germany’s 22 billion euro share of a bailout package, triggered by European finance ministers on Sunday. The lower and upper houses of parliament are expected to vote on it on Friday.

Joachim Poss, deputy head of the SPD parliamentary party, said his party would decide whether to back the package after consultations with the government but insisted Merkel had to push for a European transaction tax and limit the influence of market speculators.

“Mrs Merkel must boost her credibility in fighting speculation and for an effective financial transaction tax in Europe,” Poss told ZDF television.

“Mrs Merkel must make clear statements today,” he said. Merkel is due to talk to leading lawmakers later on Monday.

Although it is unlikely the SPD will block the rescue, the party wants to tie its support to other measures.

Merkel does not need the SPD’s support to get parliamentary approval but she would prefer to have cross-party backing on such a major issue. The SPD could stall the programme by insisting on committee hearings, a move that could further damage market confidence in the euro and embarrass Merkel.

German voters oppose a rescue for debt-ridden Greece but many lawmakers and commentators have concluded there is no alternative to save the credibility of the euro zone.

Europe’s biggest economy is to pay the biggest share of any EU state, doling out for more than 25 percent of the loans. If Greece defaults on the loan, German taxpayers will pay.

MERKEL U-TURNS

Merkel long resisted any German bailout of Greece, largely because of stiff public opposition before a crucial regional election on May 9; but she bowed to pressure from the EU and IMF and at the weekend expressed support for the rescue.

Critics have accused Merkel of being partly responsible for the scale of the crisis and size of the bailout because of her procrastination which they say undermined market confidence in the euro zone’s ability to sort out the crisis.

Once a darling of the EU, Merkel has in the last few months baffled some of her colleagues in the 27-member bloc by performing several reversals in her public statements on aid for Greece. Many have been aimed at domestic voters.

Merkel wants to avoid any embarrassments before next Sunday’s election in Germany’s most populous state of North Rhine-Westphalia which could rob her ruling coalition of a majority in the Bundestag upper house.

Poss said the SPD would have signalled its readiness to cooperate earlier.

“Merkel, she has employed tactics ahead of the vote in North Rhine-Westphalia which have caused her to be celebrated as the ‘Iron Lady’,” said Poss, referring to eurosceptic former British Prime Minister Margaret Thatcher.

If the law goes through parliament, it faces a legal challenge from German economist Joachim Starbatty who plans to file a suit with the country’s Constitutional Court. He argues that aid would breach a bailout ban set out in EU treaties. For more stories on Greece, click [nLDE6420DZ]

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