BBC NEWS | 2010/05/07 | 07:20:15 GMT
Germany’s parliament is to decide on whether to approve a multi-billion euro bail-out plan for debt-ridden Greece. The lower house, the Bundestag, is set to debate the legislation for two hours before voting. The upper house, the Bundesrat, will vote afterwards. Assuming both houses back the bill, as expected, President Horst Koehler will then sign it into law. Concerns about Greece’s economic crisis have spread fear of contagion in global markets, prompting an Asian slump. Japan’s Nikkei index shed 3.2% while Australia’s main index lost 1.6%, amid investor fears that Greece’s debt crisis could halt the global economic recovery. Those losses followed heavy falls on US markets, where the Dow Jones index slumped 9% at one point before bouncing back to end Thursday down 3.2%.
The BBC’s Caroline Hepker in New York says there are rumours that the drop may have been caused by an erroneous "fat finger" trade at a Wall Street bank. London and France’s benchmark indexes opened sharply lower on Friday. The pound also fell sharply against the dollar and the euro as results poured in from the UK general election, falling three cents, or 2%, against the dollar, to $1.4639. With the majority of results counted, projections showed that no party was on course for an overall majority, raising concerns that a weak government might not be able to implement policies quickly to reduce the UK’s high budget deficit.
Unable to act?
On Thursday, Greek MPs approved drastic spending cuts in exchange for an international financial rescue plan, amid violent protests in Athens. German Chancellor Angela Merkel has defended her country’s plan to provide 22.4bn euros ($28.6bn) in aid to Greece, saying the EU is at stake. She has warned that if the 27 member
states did not work together on such crises, "the markets will think we’re unable to act". Ms. Merkel’s Christian Democratic Union and coalition partner, the Free Democratic Party, have a comfortable majority in parliament. The opposition Social Democratic Party has said it will abstain in both votes, while the Greens have said they will support the bill. Finance Minister Wolfgang Schaeuble earlier asked the opposition for support for the legislation, telling the Westdeutsche Allgemeine Zeitung newspaper that the markets would "pay attention to how the help is being backed on a national level".
On Thursday, the Greek parliament voted decisively in favour of drastic spending cuts in exchange for the rescue plan. The measures include pay and pension cuts for public sector workers, and tax rises. But there is deep anger at the austerity programme in Greece, which has seen days of occasionally violent protests outside parliament. Under the bail-out, Greece’s 15 partners in the eurozone will lend it 80bn euros spread over three years and the International Monetary Fund will lend 30bn euros. The BBC’s Steve Rosenberg in Berlin says there is strong public resistance to the bail-out and the press has labelled Germany’s contribution as "the fattest cheque in history". Even if the legislation is approved, one group of euro-sceptic academics will challenge the decision in Germany’s highest court, our correspondent says.
Later on Friday, Chancellor Merkel will join other heads of state from the eurozone for an emergency summit in Brussels. They aim to finalise details of a 110bn-euro ($139bn; £86bn) loan package to Greece, while the G7 finance ministers are also due to discuss the Greek debt crisis and its implications for the global economy. Earlier on Friday, the French Senate approved France’s contribution of up to 16.8bn euros to the aid package for Greece. Germany and France have already called for the single currency’s rulebook to be rewritten – with tougher sanctions for those countries that run up big budget deficits, our correspondent adds.