Merkel at odds with coalition partner over Greek 'plan B'

GERMAN CHANCELLOR Angela Merkel has dismissed a suggestion by her coalition partner that the time has come to prepare for a Greek insolvency.

Philipp Rösler, economics minister and leader of the Free Democrats (FDP), said stabilising the euro in the short-term called for a discussion “with no taboos”. “That, ultimately, includes Greece’s orderly insolvency, if the necessary instruments are available,” he wrote in Die Welt.

The government disunity in Berlin unsettled markets already shaken by Friday’s resignation of German economist Jürgen Stark from the European Central Bank (ECB).

Dr Merkel’s spokesman Steffen Seibert declined to comment directly on the article, saying “any further remarks would be guaranteed not to calm the markets”.

“We are holding to the procedures whereby the troika will give cause for further steps,” he said. “We are confident that Greece will be in a position to continue the path is has already chosen.”

Amid growing reports that Germany is preparing a “plan B” ahead of a Greek insolvency, a German finance ministry official said “every ministry examines hypothetical possibilities”.

In a sign of alarm, the ruling CDU mobilised its entire front bench to neutralise remarks from Mr Rösler that were not, apparently, part of the strategy to up the ante on Athens.

CDU general secretary Hermann Gröhe said it was important to “put demands on Greece without talking it into bankruptcy” while parliamentary floor leader Peter Altmaier called the remarks “counterproductive”.

“This has to be seen in a domestic context – if there’s a [negative] signal to the markets, that’s collateral damage,” said a government official, pointing to the FDP’s continued poor performance in German opinion polls. “There’s no other justification for saying things like this.”

Despite the clear line from the chancellery, the FDP front bench refused to back down yesterday.

“As a final consequence, one cannot rule out that the Greeks will want to or have to leave the euro zone,” said FDP general secretary Christian Lindner.

As the day wore on Dr Merkel’s Bavarian allies fell in behind the FDP. “I am pleased people have been speaking out on these issues,” said Horst Seehofer, head of the Bavarian CSU.

After talks with Dr Merkel, European Commission president José Manuel Barroso insisted that “help can only be extended to those who make every effort to get their house in order”.

“A deeper integration is part of the solution to preventing debt crises in the future,” he added.

Mr Stark had a similar message, writing that EU leaders will need to go further than financial and budgetary reforms already agreed if they are to calm markets.

“It is essential in my view to transfer budget competences from national to the European level in a greater scale than previously intended,” he wrote in the Handelsblatt business daily. “This could be done at first with the creation of an informal European budget office, which would require no treaty change.”