September 27, 2011
Members of Chancellor Angela Merkel's center-right coalition, alarmed at speculation that the euro bailout fund may be given even greater powers than planned, have threatened a bigger-than-expected rebellion against her in a parliamentary vote on Thursday. Standard and Poor's is taking note.
Chancellor Angela Merkel will exhort her Greek counterpart, George Papandreou, to stick to his budget reform pledges at a meeting in Berlin on Tuesday ahead of Germany's crucial parliamentary vote on the expansion of the euro bailout on Thursday.
Pressure on Merkel is mounting, with rating agency Standard & Poor's warning that Germany itself could suffer a ratings downgrade as a result of its efforts to tackle the euro crisis, and her junior coalition partners, the pro-business Free Democrats (FDP), threatening not to back the bailout law.
The German parliament looks certain to approve the increase in the size and scope of the European Financial Stability Facility (EFSF) on Thursday because the main opposition parties have said they will support it. But it is uncertain whether Merkel will be able to muster her own center-right majority. If she doesn't, and has to rely on opposition votes to pass what is widely regarded as the most important piece of legislation of her second term, her authority will be seriously weakened.
It would trigger opposition calls for her to step down or seek an early election. She would likely resist both options, but her scope to take bold new steps to contain the crisis with fresh German guarantees would be seriously curtailed.
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