German lawmakers approved Greece’s latest rescue package as Finance Minister Wolfgang Schaeuble warned that a default in the country where the debt crisis began could trigger the collapse of the single currency.
The passage caps a year in which Chancellor Angela Merkel has had to tamp down criticism within her ranks over transfers to Greece and quell calls to expel the country from the euro. Legislators in Germany’s lower house of parliament, or Bundestag, voted 473 in favor; 100 voted no and 11 abstained.
“The potential effects of a Greek default on other euro states would be grave — in truth the consequences would be unpredictable,” Schaeuble said in Berlin. “It could trigger a process at the end of which the entire euro area could break apart.”
Comparing Greece with eastern Europe after the collapse of the Soviet Union, Schaeuble said crisis-fighting efforts are working as European leaders shepherded through a new package designed to ease terms for bailout aid for Greece and help resolve the three-year-old debt crisis.
Lawmakers in Merkel’s coalition and opposition leaders this week lauded the agreement in Brussels to give Greece more time to meet budget targets. The accord met Germany’s condition on ruling out a debt write-off for Greece that would be felt by creditor countries’ taxpayers.
Schaeuble said Greece should stay in the euro, underscoring moderation by northern European leaders and warnings that the consequences of a Greek departure would be calamitous. Dutch Prime Minister Mark Rutte said this week that Greece may need help to stay in the euro on top of new measures.
The vote came as the Bloomberg Global Poll showed that Germany, Europe’s largest economy, will be tipped into a recession as the debt crisis extends into the new year. A slump in the German economy would remove a rare engine of demand for the rest of the continent, probably extending the euro-area-wide recession that was confirmed last quarter.
Unemployment in the euro bloc rose to 11.7 percent from 11.6 percent in September, the European Union’s statistics office in Luxembourg said on Friday. That’s the highest since the data series started in 1995 and in line with the median estimate of 34 economists in a Bloomberg News survey.
In the latest bid to keep the euro intact, finance ministers agreed Nov. 27 to cut the rates on Greece’s bailout loans, suspend interest payments for a decade, give Greece more time to repay and engineer a buyback of the country’s bonds.
That would still leave Greece with debt at 124 percent of gross domestic product in 2020.
Schaeuble acknowledged the effects in Greece of the austerity measures, which have included wage, benefit and pension cuts and compounded a recession in its fifth year.
“The Greek population has had to bear a heavy burden,” Schaeuble said. “But if the Greek people are willing to carry the burden, we’re willing to help.”