Germany has said it has no concrete plans to give aid to Greece, after a magazine reported it had sketched out a proposal in which euro zone members would provide some 20-25 billion euros of support. Officials in Chancellor Angela Merkel's ruling coalition concede in private that contingency plans have been drawn up should Athens be unable to service its debt. Some legal experts have questioned the legality of providing aid. That could complicate any rescue effort, which would be led by Germany, the biggest economy in the bloc. Why is Germany reluctant? Germany has worked hard to consolidate its public finances in recent years and is loathe to shell out for another country's fiscal mistakes. It is embroiled in public debate over the sustainability of its own welfare system for a population that is shrinking and ageing. The idea of providing assistance to “profligate” EU partners like Greece has been pilloried in sections of the German press. Surveys show Germans are overwhelmingly opposed to Berlin riding to the rescue of Athens. Moreover, Merkel faces a big electoral test in May, when voters go to the polls in North Rhine-Westphalia (NRW), Germany's most populous state. If her centre-right coalition of Christian Democrats and Free Democrats cannot form another NRW government, it will lose its majority in the Bundesrat, the upper house of parliament. Berlin worries that if it helps Greece, other states may follow in asking for help. What is the legal situation? Rules on assisting member states are laid out in the EU treaty, whose contents have been interpreted in various ways. Article 125 stipulates that both the EU and a member state “shall not be liable for or assume the commitments of central governments ... without prejudice to mutual financial guarantees for the joint execution of a specific project.” But article 122 says the EU Council may grant assistance “where a member state is in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control.” Andrew Scott, an EU expert at Edinburgh University's law faculty, said the main barrier to bilateral aid was political. “The no-bailout clause does not stop the German government using taxpayers' money to buy up Greek debt,” he said. “But if you bail out Greece from within, the markets will never take seriously a risk premium for a debt-ridden member state again.” Behind the conundrum lies a “constitutional problem” inside the EU for which the bloc does not yet have an answer, said Frank Schorkopf, a legal expert at Goettingen University. Who else could help greece? Many analysts say a rescue led by the International Monetary Fund could offer the cleanest solution. The EU has so far resisted this, wary that it could be seen as an indictment of the budget rules designed to underpin the euro and the bloc's policing of member states' finances. Another option may be to front-load funds due to Greece from the EU's 2007-2013 budget. The European Investment Bank and the European Bank for Reconstruction and Development have also been mooted as potential sources of aid. Is Germany likely to pay up? Germany invested huge political capital in the introduction of the euro and few doubt it would act to save Greece if the single currency was threatened. Its financial sector could also suffer massive writedowns from a Greek insolvency due to hefty exposure there, according to reports. However, Germany's exporters have profited from a decline in the euro's exchange rate against the dollar during the Greek crisis, which may have sapped some urgency from Berlin's desire to act. Leading newspapers have begun questioning the way the euro was launched and even whether it should have been launched at all. Some want Greece thrown out of the currency bloc. How might aid work? German Finance Minister Wolfgang Schaeuble favors bilateral aid for Greece if necessary, according to media reports. Sources in the ruling coalition have said state-owned bank KfW could be used to buy Greek government bonds. A separate proposal saw the KfW issuing guarantees to German banks that bought Greek debt.
