Greek Tragedy: Will the Contagion Spread?

After weeks of hesitation over the German response to the Greek crisis , Chancellor Angela Merkel is suddenly calling for swift action.

"It is clear that the negotiations must now be accelerated," she said Wednesday at an appearance together with Dominique Strauss-Kahn, the head of the International Monetary Fund (IMF), in Berlin. A serious-looking Merkel called for an agreement on assistance for Greece "within the next few days," adding: "We will not back out."

Observers were surprised by Merkel's strong words. Until now, the chancellor has not exactly come across as a driving force when it comes to action on the Greek crisis.

Sitting Out the Crisis

On the contrary, she has long been reluctant to promise the Greeks billions of euros in European aid, something which has earned her the nickname "Madame Non" in the European Union. At home in Germany, however, she has been feted by the tabloid press as the "Iron Chancellor" because she had rebuffed the "bankrupt Greeks."

Merkel thought she could sit out the crisis, postponing any unpopular promise to give aid to the Greeks at least until after key state elections in North Rhine-Westphalia on May 9. The vote is crucial to Merkel because it will determine whether her conservative Christian Democrats and their coalition partner, the business-friendly Free Democrats, are able to maintain their majority in the Bundesrat, Germany's upper legislative chamber which represents the interests of the states.

But Merkel's calculation that the markets could be kept calm until then with vague promises did not work out. After all, the forces of globalization do not care about a German state election.

Hectic Pace

Greece is not only looking shaky; it is positively tumbling. A national bankruptcy is getting closer. And after Portugal's credit rating was downgraded on Tuesday, followed by a downgrade for Spain on Wednesday, the prospects for other euro-zone members are also looking bleak. Observers fear a wildfire could break out in the euro zone. The stability of the European single currency is at stake.

Now things are moving at a hectic pace, and the chancellor is acting like there's no tomorrow. The government has drafted a concise law authorizing Berlin to provide cash injections for Athens. Merkel's cabinet could approve the draft as soon as next Monday, and Germany's two legislative chambers, the Bundestag and Bundesrat, could pass it before the North Rhine-Westphalia election.

On May 10, an EU summit could formally release the aid and the first billions could be flowing to Athens by May 19, the date on which Greece must float a new bond on the market.

Merkel also discussed the Greek debt crisis in a telephone call on Wednesday evening with US President Barack Obama. According to the White House, the two leaders talked about "the importance of resolute actions by Greece and timely support from the IMF and Europe."

'A Problem for Germany'

In Berlin on Wednesday, one crisis meeting followed another, as the chancellor, Finance Minister Wolfgang Schäuble and members of parliament met with the heads of the European Central Bank (ECB) and the IMF to get briefed on the seriousness of the situation -- a situation that is indeed very serious.

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