Merkel ally threatens German bailout veto if Greece fails on reforms

Germany will block any new aid to ailing Greece if Athens does not fully comply with the terms of previous rescue packages, even if other countries support unlocking funds, a senior lawmaker has said.

The deputy head of Chancellor Angela Merkel’s conservative parliamentary bloc, Michael Fuchs, told business daily Handelsblatt that Berlin was ready to use its veto if it is unhappy with findings from the Greece creditors «troika».

“You can quote me: even if the glass is half-full, that is not enough for a new aid package,» he said in an interview to appear in the paper’s Monday issue. «Germany cannot and will not agree to that.”

Germany, Europe’s biggest economy, is waiting with eurozone partners for the report on Greece from a so-called troika of inspectors from the European Union, International Monetary Fund and European Central Bank.

Their verdict, which is expected by mid-September, will determine if Athens receives the next installment of 31.5 billion euros ($36.6 billion) in rescue funds.

Mr Fuchs said that even if other eurozone countries call to release the funds after the report, «Germany will use its veto» as part of the EFSF temporary rescue fund if it concludes that Greece «has not met the requirements».

He noted it was impossible to force a country out of the eurozone but assumed the «Greek government knows what it needs to do if it is not in a position to fulfil the reform requirements.”

Germany «has reached the limits of what it can bear», he added.

He said he also opposed the European Central Bank providing further emergency loans to Greece and thus becoming a «covert money printing press».

Mr Fuchs said that if Greece fails to live up to its reform pledges, then «the ECB cannot open up detour possibilities and provide money that the Greeks could not otherwise get from the (European) rescue funds».

Patience with Greece’s sputtering reform efforts is wearing thin in Germany, Europe’s effective paymaster, with leading members of Ms Merkel’s ruling coalition openly questioning its ability to stay in the eurozone.

The government’s official line is that it will wait for the troika report before drawing any conclusions.