April 7, 2011 / 9:12 AM / 7 years ago

UPDATE 3-Germany's coalition moves to back Portugal bailout

* Merkel’s finance minister sees “sensible” step by Portugal

* Conservative whip predicts broad German support

* Sometimes eurosceptic Merkel allies say in favour

(Adds Irish, Spanish and Dutch comments)

By Stephen Brown and Andreas Rinke

BERLIN, April 7 (Reuters) - Germany threw its weight behind Portugal’s request for financial help from the European Union on Thursday with Chancellor Angela Merkel’s conservatives and their sometimes eurosceptic allies looking likely to back such a deal.

Finance Minister Wolfgang Schaeuble, mindful of the concerns among taxpayers in affluent Germany already bearing the brunt of existing bailouts for Greece and Ireland, pointed out that such aid could only be granted in return for tough reforms.

Calling it a “sensible and necessary step”, Schaeuble said in a statement that within the current bailout mechanism, aid was only available in return for “an adjustment programme”.

But crucially the first signals from members of Merkel’s coalition were positive for Lisbon, including from her junior partners, the Free Democrats (FDP), who sometimes talk tough on bailouts to shore up their flagging popularity at home.

Senior FDP figures including Volker Wissing, who heads the German parliament’s finance committee, welcomed Portugal taking a step that has long been widely considered inevitable.

“We’re relieved that Portugal is now seeking aid and thus sending a signal that will calm markets,” said Wissing.

Portugal’s aid request was closely watched across Europe, especially in countries that have either already sought help — Greece and Ireland — or see it as a risk, such as Spain.

Irish Deputy Prime Minister Eamon Gilmore told parliament in Dublin that Portugal’s situation “underlines the extent to which the problem has a European dimension”.

In Spain’s El Pais daily, an editorial headlined “the final rescue” hoped Portugal’s rescue would draw a line under the euro crisis. The business daily Expansion said Portugal’s inability to grow economically was similar to that of Spain.

LIVING BEYOND MEANS?

Dire warnings about the euro zone turning into a so-called “transfer union”, where Germany with its vibrant economy and deep pockets has to fund the debts of spendthrift peripheral European states, get a receptive audience in Germany.

Hans-Werner Sinn, head of the influential Ifo economic think-tank, was quoted in the top-selling daily Bild warning: “The more money flows, the longer the indebted countries are going to live beyond their means, the more money is lost.”

However, Werner Hoyer, Germany’s FDP deputy foreign minister, told Reuters Portugal’s decision had averted a “very dangerous” threat for the country and the euro zone, saying market reactions showed there was “no risk of a chain reaction”.

Such comments backed the view of Merkel’s parliamentary leader Peter Altmaier that bailing out Portugal was “the best solution in the circumstances” and should get “unanimous and cross-party support in parliament”.

“We have in the course of the past year made clear under what conditions this help will be offered, meaning that when you get help you must in return sort out your finances, save, and rebuild your competitiveness,” Altmaier told Reuters.

“These are always tough decisions but they are unavoidable because we want to ensure this aid makes it possible to have a sustainable Portuguese economic recovery.”

The Dutch government, closely aligned with Germany on euro matters, also stressed that any Portuguese aid would “come under the strict rules of the IMF and the European emergency fund”, Finance Minister Jan Kees de Jager told ANP news agency.

Merkel’s whip Altmaier, asked about the eurosceptic comments of some FDP leaders on bailouts, said the strict terms agreed for the existing European Financial Stability Facility and the European Stability Mechanism that succeeds it in 2013 meant that “in the end, the coalition will act in a united fashion”.

“The CDU/CSU and FDP have always been Germany’s pro-European parties for the last 60 years,” Altmaier said in an interview.

But with the FDP in turmoil after Foreign Minister Guido Westerwelle quit as party leader, some conservatives wonder whether his 38-year-old successor, Health Minister Philipp Roesler, has the power to keep the rest of the party in line.

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