May 2, 2010 / 2:33 PM / 9 years ago

Germany to scrutinise Greek deal before backing aid

* German economics minister says to scrutinize Greek accord

* Finance minister says parliament may back loan this week

By Erik Kirschbaum

BERLIN, May 2 (Reuters) - Germany will examine closely an agreement between Greece, the European Union and the IMF on a bailout for debt-stricken Athens before deciding whether to contribute, Economy Minister Rainer Bruederle said on Sunday.

His guarded response to the multi-billion euro financial package reflected deep German resentment at having to rescue Greece, which manipulated its figures to join the euro zone in 2001 and has lived beyond its means ever since.

But Finance Minister Wolfgang Schaeuble, speaking before an emergency euro zone finance ministers meeting in Brussels, said Berlin was well prepared to push through legislation to lend money to Greece and could win parliamentary approval by Friday.

Bruederle said Chancellor Angela Merkel’s cabinet would review the deal on Monday before deciding whether to contribute.

Germany is the EU’s biggest economy and chief paymaster. Any doubt about its willingness to join the rescue would cause renewed turmoil on financial markets.

“The analysis that we now have received shows quite clearly the gigantic and long-delayed need for fiscal reform in Greece,” said Bruederele, whose pro-business Free Democrats have been especially resistant to any Greek rescue for months.

“Just as Germany and German citizens will stand for the stability of the eurozone, I now expect the very same from the Greek government — and that they quickly, decisively and credibly implement the fiscal reforms to the letter of the law.”

The aid package is expected to allay investor concerns of an imminent default. But there is still an open question mark over political approval across Europe, according to Lena Komileva, head of G7 market economics at Tullett Prebon.

The finance ministers are expected to recommend the deal, but euro zone leaders also need to give their blessing, likely at a summit on Friday or Saturday. Parliaments in Germany — and some member nations — must also give their approval.

CAMPAIGN ISSUE

Greece’s woes became a top campaign issue a week ahead of a key regional election Germany’s most populous state, where Merkel’s conservative Christian Democrats face a defeat that could rob them of their majority of the upper house in Berlin.

North Rhine-Westphalia state premier Juergen Ruettgers, a conservative ally of Merkel, demanded new conditions for the financial bailout, including sending a European Commissioner to Athens to oversee spending cuts and Greek accounting.

“We can’t give Greece any blank cheques,” Ruettgers told Der Spiegel news magazine. “It’s got to be clear that Greece will have to pay back the money and that there will be a tough savings package that will be controlled.

“And that’s why the European Commission has to send a Commissioner to Athens to make sure the numbers are accurate and the savings measures agreed are strictly adhered to,” he added.

Polls say Ruettgers faces defeat next Sunday. He is eager to avoid being a one-term state premier in the left-leaning region.

The Greek debt crisis had only been a secondary campaign issue in North Rhine-Westphalia, Germany’s most populous state, before Ruettgers went on the attack in his magazine interview.

Opinion polls show his centre-right coalition with the Free Democrats headed for defeat, due in part to local financial scandals. He won the nickname “Rent-a-Ruettgers” after party deputies offered private meetings with businessmen for cash.

A poll by the Emnid institute in Bild am Sonntag newspaper gave the CDU and FDP a combined 46 percent, down from a joint 51 percent five years ago. The opposition Social Democrats, the Greens and the Left party would win a total of 50 percent.

Ruettgers could in theory stay in power by switching coalition partners, either the Greens or SPD. But that would deny the CDU/FDP a majority in the Bundesrat, upper house, and force Merkel to make awkward compromises with the opposition.

Ruettgers, whose tough talk on Greece was headline news in Germany at the weekend, said that in the future EU states should be stripped of voting powers if they fail to adhere to euro zone Stability Pact limits on public debt and deficits.

“They could lose their voting rights for a certain period of time,” Ruettgers said.

editing by Paul Taylor

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