Germany finds bailing out is hard to do
Germany's Chancellor Angela Merkel is facing intense domestic pressure to force private banks with a stake in Greek bonds to contribute to the bail-out fund to rescue the Greek economy.
But so far, the chancellor and her Finance Minister, Wolfgang Schaeuble, are resisting.
German politicians are gearing up for a vital 9 May election in North Rhine Westphalia.
Not only is it the country's most populous state, but should Chancellor Merkel's coalition parties fail to secure a win, they would lose control of Germany's second chamber of parliament.
The outcome of the election remains very uncertain.Coalition of the unwilling
Bailing out is hard to do, even at the best of times. Let's face it: agreeing, however unenthusiastically, to use taxpayers' money to support the struggling finances of another country is never going to be a winner.
But when every single party in parliament, including your own, is calling for banks and other private stakeholders in Greek bonds to pay up as well, you may be looking at a perfect political storm.
A coalition of the unwilling seems to be forming in Berlin. Unsurprisingly, it includes the opposition Social Democratic Party (SPD), Die Linke (the Left party) and Greens/Coalition 90.
But the Free Democratic Party, the free market-oriented and junior partner in the government coalition, and even the Christian Democratic Union, Mrs Merkel's own party, have also been critical of her plan to use public money to finance the German portion of the Greek bail-out.
In the colour-coded world of German domestic politics this would be a Red-Red-Green-Yellow-Black coalition. Does that sound like a very nasty bruise to you? Mrs Merkel must certainly think so.
SPD leader Frank Walter Steinmeier said his party would be willing to sign off on the bail-out only if private banks were forced to contribute. This is a sore point for Mrs Merkel, who has been reluctant to apply pressure to Germany's private sector.
There is also concern among analysts that apart from further dragging out the intervention, involving the banks could result in a zero-sum game.
A large amount of the Greek debt held by German banks is held by banks which have already been bailed out and now belong to the German state. If these banks failed as a result of bailing out Greece, the taxpayer would again have to foot the bill.
German President Horst Koehler, a former head of the International Monetary Fund, has also weighed in, calling for tougher international regulation.
"I'm convinced that the next financial crisis will not only put into question the functionality of our financial and societal system but also its credibility," he said.Little public support
Only 16% of Germans currently support the proposed Greek bail-out, a recent survey conducted by pollsters Allensbach found. That's hardly the level of public support you're hoping for before a crucial regional election. And yet that is exactly what Mrs Merkel is facing.
End Quote Gustav Horn Director of the German Institute for Macroeconomic Policy
We can't allow the euro to be sacrificed on the altar of Bild [German tabloid newspaper]”
The current row over the Greek bail-out is turning into a political maelstrom for Mrs Merkel's government. For weeks now, public opinion has been turning against the rescue package, led by a media campaign challenging the merits and fairness of the plan.
One sore point is that because of the differences in the two countries' state pension systems, German taxpayers might end up financing a far more comfortable retirement for Greeks than their German counterparts would be able to enjoy.
Gustav Horn, director of the German Institute for Macroeconomic Research (IMK), believes that the main criticism of Mrs Merkel should be that she listened to critics for too long.
"This is a moment when we would have needed decisive action," he says. "Financial markets become nervous very easily and the chancellor's reluctance to act swiftly has made things a lot worse."A vicious circle
Mr Horn says that a vicious cycle has exacerbated an already dangerous situation.
"The tabloids pick up on the story and follow the 'this is unfair' angle, this gets picked up by the politicians, finally the tabloids pick up on the political reaction and the whole thing starts over again," he says.
"We can't allow the euro to be sacrificed on the altar of Bild [German tabloid newspaper]."
Recently, the criticism in Germany has focused on Mrs Merkel's reluctance to force banks and other private entities who made money on Greek bonds to contribute to the bail-out fund.
Now that the big parliamentary parties have jumped on the bandwagon, she may face serious problems in getting the bail-out legislation through parliament in time for the 9 May vote. Either way, the longer Germany waits before it finalises its plans, the higher the risk for the rest of Europe.