no free rides, no free money

The German taxpayers are revolting..

German Chancellor Angela Merkel rallied European leaders to help Greece deal with its debt crisis. She still hasnt sold her political allies at home on the idea.

Lawmakers from Merkels coalition partner, the Free Democratic Party, are threatening to prevent her from turning the moral support offered by European Union leaders yesterday into financial aid. Theyre backed by polls showing public opposition to such a move.

Our citizens cant be expected to pay for the consciously flawed fiscal and budgetary polices of other euro-zone countries, Carl-Ludwig Thiele, the FDPs financial-policy spokesman in parliament, said in a phone interview today.

The dispute risks deepening the erosion in support for Merkels four-month-old coalition, which has slid in polls amid bickering over bank levies, solar-energy aid and nuclear power. Combined support for three parties in her government fell to the lowest since 2001 in a Feb. 10 Forsa poll.

Merkels clout will be tested if she seeks to go beyond the statement of support for Greece by EU leaders. They pledged help for the Athens government in exchange for adherence to a budget- cutting regime, stopping short of agreeing to concrete help.

Other euro-area governments may face similar challenges as Merkel in backing a bailout of a euro-area partner after tapping taxpayers to rescue banks.

Were at a very early stage and politicians have realized it would be inappropriate to give Greece too much support, said Julian Callow, chief European economist at Barclays Capital in London. I cant conceive that EU governments will be willing to provide free money here.

FDPs No

If financial aid is held out as a possibility, we as parliamentarians are duty bound to examine whether we can justify this to taxpayers, Frank Schaeffler, the FDPs deputy finance spokesman in parliament, said in an interview. The FDP position is clear: No.

In a worst case, if a bailout for Greece was used as a blueprint for sovereign debt crises afflicting Ireland, Italy, Spain and Portugal, Germany may be on the hook for as much as 100 billion euros, according to Stephen Jen, London- based managing director at BlueGold Capital Management LLP.

That underscores Germans aversion to public debt, which is soaring to a record after Merkel cut taxes to speed recovery from the deepest recession since World War II. A Feb. 10 poll for Stern magazine said 62 percent were concerned about the debt, while 59 percent were worried theyll lose their job.

Merkels coalition also needs the FDP as she faces a regional election in May in Germanys most populous state, North Rhine-Westphalia, where her Christian Democratic Union governs with the Free Democrats. Losing the state may cost Merkel her majority in the upper house of parliament, making it more difficult to pass legislation.

To sell German voters on aid, Merkel will have to show shes defending the euro, that there will be very, very tough conditions for Greece and massive control from Germany, Jan Techau, a European policy expert at the NATO Defense College in Rome, said in a phone interview.

People realize the benefit of the euro, he said. But they dont want a free ride for countries like Greece.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a1ggdce_G9a4&pos=9