Germany's Schaeuble hails Greek deal ahead of key MP vote

(BERLIN) - Germany's hardline finance minister Wolfgang Schaeuble on Sunday hailed a change in tone in talks with Greece over its next bailout but warned Europe would closely monitor the pace of reforms in Athens.

Ahead of a key vote in the German parliament Wednesday to approve a third rescue package for its debt-mired eurozone partner, the influential Schaeuble struck an upbeat, conciliatory note.

"After truly arduous negotiations, they understand now in Greece that the country cannot get around real and far-reaching reforms," he told the Bild am Sonntag newspaper.

Schaeuble, who has driven a tough bargain throughout the crisis with Athens, called an agreement reached Friday among the eurozone finance ministers "responsible" and "in keeping with the commitments made at a euro summit in July".

He said that the eurozone countries would now be keeping close watch to ensure that the reforms-for-aid deal "is implemented point-by-point" in Greece.

One of Schaeuble's deputies, Jens Spahn, said that he now expects talks on debt relief given the insistence of the International Monetary Fund, one of Greece's key creditors, on measures to bring Athens's debt mountain down to a manageable size.

But Spahn, seen as a rising star in Chancellor Angela Merkel's conservative Christian Democratic Union, told the Welt am Sonntag newspaper it marked "a decisive step forward that there is a general understanding that this is possible without a haircut" or debt writedown.

Germany has ruled out erasing any of Greece's debt from the books but has indicated it would be open to giving Athens more time to pay its creditors back if it continues to implement pro-market economic reforms.

As Europe's biggest economy and contributor to Greek aid, Germany plays a key role in the emergency package approved by eurozone finance ministers worth up to 86 billion euros ($96 billion).

- Show of support -

MPs from Germany's Bundestag lower house of parliament will be called back from the summer recess to vote on the bailout Wednesday.

Analysts say approval is almost certain, given that Merkel's governing coalition of conservatives and Social Democrats has 504 out of 631 seats in the assembly.

The main interest is in the scale of any revolt by deputies in Merkel's conservative bloc, they say.

On July 17, the Bundestag was recalled from its summer break for a first vote on giving the green light to start negotiations on the bailout.

It was opposed by 60 out of the 311 legislators in Merkel's bloc, seen as a blow to the chancellor on her 61st birthday.

Schaeuble, who has repeatedly taken a more sceptical line than Merkel during the crisis, enjoys an approval rating of around 70 percent among Germans, who have grown increasingly reluctant to see their tax money go toward bailing out Greece.

His endorsement of the latest rescue package comes after Merkel's chief whip in parliament threatened conservative MPs with sanctions should they fail to toe the party line on Wednesday.

An EU source reported that Merkel and Schaeuble, whose complex decade-long partnership in government is a source of fascination in Berlin, had "major differences" over the terms of the Greek rescue last week.

The finance ministry argued for a bridging loan for Greece to cover a 3.4-billion-euro repayment due to the European Central Bank on August 20 rather than sign off on what it saw as a hasty deal with Athens.

In a two-page document cited in the German press, Schaeuble's ministry outlined reservations about the terms of the agreement hammered out between Athens and its creditors.

However Schaeuble's interview Sunday backing the package, as well as positive comments made at the eurozone ministers' meeting in Brussels Friday, marked a show of support for the chancellor against any backbench rebellion during Wednesday's vote.

Merkel, who has been at pains to ensure Greece does not crash out of the eurozone while still maintaining the unity of her government, will address the chamber ahead of the vote before leaving on an official visit to Brazil.

She was due to give a wide-ranging interview to public television later Sunday about the Greece crisis and other issues facing her government.