Uncertainty over IMF role in Greek rescue raises risks for Merkel

German Chancellor Angela Merkel will ask lawmakers to back an 86 billion euro ($95.5 billion) bailout for Greece at a special session of parliament on Wednesday despite uncertainty about whether the International Monetary Fund (IMF) is on board.

Parliamentary approval is not in doubt because the Social Democrats (SPD) and Greens are expected to back the rescue but the vote could expose divisions in Merkel's conservative ranks.

The vote is shaping up as a major test for both Merkel and one of her closest allies, the head of her conservative bloc in parliament, Volker Kauder.

Kauder, who incensed fellow lawmakers last week with threats of retaliation if they rebelled and voted against a bailout, is on record as describing IMF involvement as a "condition" for the support of his party.

And on Friday, Merkel's spokeswoman Christiane Wirtz described IMF participation as "decisive" for the government.

However under the bailout approved by euro zone finance ministers at a meeting in Brussels late on Friday, it is unclear whether the IMF will end up having a role.

IMF Managing Director Christine Lagarde told the ministers by telephone that she could not commit until her board reviewed the situation in the autumn. She renewed a call for "significant debt relief" for Greece, a step Merkel's government has repeatedly pushed back against.

German Finance Minister Wolfgang Schaeuble reiterated his opposition to an outright writedown of the face value of Greek debt in an interview with Deutsche Welle published on Saturday. He said the scope for milder forms of debt relief, like extending debt maturities, was "not very big".

Risk of big rebellion

Last month, a record 65 lawmakers from Merkel's conservative camp broke ranks and refused to back negotiations on the bailout.

Far more could rebel in Wednesday's vote, with top-selling German daily Bild estimating on Saturday that up to 120 members of her Christian Democratic Union (CDU) and its Bavarian sister party, the Christian Social Union (CSU), may refuse to back the government.

The vote in the Bundestag is scheduled for 9 a.m. (0300 ET) on Wednesday, which means Merkel will likely have to push back her departure for Brazil on a government trip, which had been scheduled for 10 a.m.

If 100 or more of her conservative allies rebel in the vote it would be seen as a major political setback for the chancellor, who remains highly popular after 10 years in office.

A large rebellion would be an even bigger danger for Kauder, whose threat last weekend to sanction lawmakers who voted against the bailout by removing them from key parliamentary committees appears to have backfired, firing up the "No" camp.

"If there is no firm commitment from the IMF to participate in the third aid package then we have a new situation," said Wolfgang Bosbach, a high-profile CDU rebel on Greece.

Bild asked in a full-page spread on Saturday: "How dangerous is it getting for Merkel?". The paper said it would be a "political catastrophe" for her should she fail to get a majority of her 311-strong conservative bloc in parliament to back the deal.

[Reuters]