Merkel Says Aid to Greece Must Address Budget Woes at ‘Roots’

March 21 (Bloomberg) -- German Chancellor Angela Merkel signaled a demand for greater budget discipline was the price for her supporting European Union aid to Greece, denouncing what she called “superficial” solidarity and seeking to quell speculation of a split with her finance minister on the issue.

Merkel said she’s made no decision on whether to back EU aid or to seek International Monetary Fund assistance to help Greece contain Europe’s biggest budget deficit. A government spokesman confirmed her statement, which was reported by Deutsche Presse Agentur, citing an interview to be broadcast today by Deutschlandfunk.

Her comments underscored the struggle within Merkel’s government -- and among European leaders -- on how to react to the Greek budget crisis. Public opposition to a bailout for Greece has escalated in Germany, the main contributor to the EU budget, before an EU summit in Brussels March 25-26.

The German government sought to play down divisions between Merkel and Finance Minister Wolfgang Schaeuble, denying a report in Der Spiegel magazine that the finance chief told his staff not to communicate with chancellery aides without his consent.

“An intensive exchange occurs daily between the chancellor and the finance minister along with their ministries on Greece,” said a statement from the government press office yesterday.

Merkel’s government said March 19 it wouldn’t rule out a loan to Greece from the IMF. Schaeuble’s spokesman expressed “great reservation” about aid from the Washington-based lender.

CDU Rally

In an appearance before members of her Christian Democratic Union, Merkel lauded Greek Prime Minister George Papandreou’s efforts to cut his budget deficit to 8.7 percent of gross domestic product from 12.7 percent, calling his austerity measures “a real achievement.”

“There has to be solidarity that tackles the problem at its roots, not solidarity that’s superficial and in the end weakens everybody,” Merkel said at a political rally in the city of Muenster in the western state of North Rhine-Westphalia.

Merkel is open to different options on Greece, according to the Deutschlandfunk interview reported by DPA. The Greek government isn’t yet in need of financial assistance, German government spokesman Ulrich Wilhelm told reporters in Berlin.

“We assume that Greece is in a position to solve its problems itself with its consolidation program,” Wilhelm said.