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Reluctantly, Germans pledge $29 billion to Greek bailout

German Chancellor Angela Merkel, right, and Foreign Minister Guido Westerwelle meet in Berlin Monday on the Greek bailout.

Associated Press

German Chancellor Angela Merkel, right, and Foreign Minister Guido Westerwelle meet in Berlin Monday on the Greek bailout.

BERLIN — Chancellor Angela Merkel's Cabinet approved legislation on Monday that would give Greece $29.6 billion over three years as part of a wider bailout, as the German government acknowledged that letting Greece go bankrupt could send the euro into a tailspin and hurt Germany's own economy.

"It doesn't only mean that we help Greece, but that we stabilize the euro as a whole, which helps people in Germany," said Merkel, who, along with Germany, had been battered by critics for dragging her feet on any decision until Greek bonds were relegated to junk status last week.

The remark was a nod to the popular discontent in Europe's biggest economy about having to pay so much to help a fellow European Union country that many Germans feel has been fast and loose with its finances for years.

The European Central Bank, meanwhile, suspended its rating limits on Greek debt.

Both moves were mandatory after European governments and the International Monetary Fund agreed Sunday to give $145 billion in loans to Greece over three years. The loans came after Athens adopted a new round of austerity measures that provoked fresh uproar among workers.

IMF officials say Greece could start receiving money from the rescue package in about a week.

Germany would contribute $11.1 billion this year, followed by $18.5 billion over 2011 and 2012, or 28 percent of the overall package.

The draft law backed by the Cabinet will be debated by both houses of parliament, and Merkel wants to have it approved before she heads to Brussels on Friday for an EU summit on Greece. The bill is expected to pass.

In Rome, Italian Foreign Minister Franco Frattini criticized Berlin for the delay. "The later you intervene, the worse it gets," Frattini said Monday.

France will contribute 20.7 percent of the total, or about $21.9 billion, over three years, at a fixed rate of 5 percent, French Finance Minister Christine Lagarde said.

Greece announced more austerity measures on Sunday worth $40 billion through 2012, including public service and pension pay cuts and higher taxes. In response, about 1,000 garbage collectors and other striking municipal workers marched to the Greek parliament on Monday, chanting "trash for parliament, not the landfill!"

But Prime Minister George Papandreou insisted the new measures are vital for Greece's financial survival. "We are making changes that should have happened years ago."

The ECB, the central bank for the 16 nations that use the euro, said Monday it was suspending the minimum credit rating requirement for all existing and new debt instruments "issued or guaranteed by the Greek government."

Reluctantly, Germans pledge $29 billion to Greek bailout 05/03/10 [Last modified: Monday, May 3, 2010 8:46pm]
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