German MPs approve rescue package for crisis-hit Greece

THE German parliament approved Berlin's share of the rescue package for debt-laden Greece after a boisterous debate yesterday, in which the finance minister told politicians that they had no alternative to the unpopular measure.

• German chancellor Angela Merkel

The lower house of parliament voted 390-72, with 139 abstentions, to authorise granting as much as 22.4 billion (193.4bn) in credit over three years. That is part of a 110bn (94.9bn) package backed by eurozone members and the International Monetary Fund.

Chancellor Angela Merkel's centre-right coalition was joined by one of the three opposition parties in approving the aid. The upper house of parliament – representing Germany's 16 states – added its approval.

The move came after three people died as protesters set fire to a bank in Athens on Wednesday during a strike against planned austerity measures.

Germans dislike the idea of rescuing another country from its financial irresponsibility, but Ms Merkel welcomed " a very important decision".

She insisted European leaders must act quickly at an emergency summit of the 16 euro nations being held last night to contain the contagion of Greek's debt crisis. She said European nations had "no more time" for reforming market regulations.

Finance minister Wolfgang Schaeuble told lawmakers before they voted that "we have to make this decision and we have no better alternative.

"Any other alternative would be much more expensive for the Germans, would be much more dangerous, would carry much bigger risks," he added.

Mr Schaeuble said central bankers and the IMF agreed "it would be disastrous to risk ... a member of the European currency union, Greece, now becoming insolvent.

"This is about defending the common European currency and with it we are defending the European project."

The aid bill now needs only the signature of president Horst Koehler, who can refuse to sign bills but hardly ever does.

A group of academics who argue that the aid package violates the EU's Lisbon Treaty filed a complaint to Germany's highest court to try to stop it. But analysts at the Royal Bank of Scotland said the move was unlikely to block the payment.

Meanwhile, the finance ministry said a group of German banks had agreed to provide 8.1bn (6.9bn) in financing to Greece.

Ms Merkel long took a tough line on aid, and opponents accused her of dragging her heels ahead of a regional election this weekend.

Sigmar Gabriel, the leader of the biggest opposition party, claimed she had "destroyed trust in the credibility of Germany's European policy".

His Social Democrats abstained. They had hoped to couple the vote with a call for a tax on financial market transactions – which Mr Schaeuble described as unrealistic, given a lack of international support.

The Greens, also in opposition, voted in favour. But the hard-left Left Party objected to the rescue package on the grounds it would make things worse for Greece.

The party's Gesine Loetzsch described the austerity package planned for Greece as "brutal" and said Germany was doing too little to control markets.

"Speculators are Taleban in pinstripes, and people in our country must be protected from these Taleban," he said – drawing a rebuke from speaker Norbert Lammert.

European leaders move to reassure markets

EUROPEAN Union leaders yesterday moved to persuade global markets that the spiralling contagion from Greece's debt crisis will not spread to other countries and derail the continent's economic recovery.

Ahead of an evening summit of the 16 euro countries, French president Nicolas Sarkozy and European Commission president Jose Manuel Barroso met EU president Herman Van Rompuy to assess the financial fallout of the past days, with markets testing the limits of the euro's robustness.

German chancellor Angela Merkel yesterday spoke with US president Barack Obama, who said he supported the effort to deal with the crisis in Europe.

After the euro dropped to its lowest level in 14 months and bond markets dumped Greek debt, a summit originally called to sign off on the bailout and draw lessons for the future suddenly turned into one of crisis management.

EU leaders have insisted that the Greek financial implosion is a unique combination of bad management, free spending and statistical cheating that does not apply to other eurozone nations, including the troubled Spain or Portugal.

They said the bailout should contain the problem by giving Greece three years of support and preventing a default when it has to pay 8.5 billion (7.3bn) in bonds coming due 19 May.

Agreement on rescue for Greece "will be a demonstration of Europe's force, of solidarity," French prime minister Francois Fillon said after a meeting with Portuguese prime minister Jose Socrates.

"We will protect Greece and reinforce the stability of the eurozone," he said.