Germany Comes to Greece's Rescue — but Is It Too Late?

After weeks of deliberations and tough talking over the Greek debt crisis, German Chancellor Angela Merkel is putting her foot firmly on the gas pedal. "It's perfectly clear that the negotiations between the Greek government, the European Commission and the International Monetary Fund [(IMF)] must now be accelerated," Merkel said Wednesday, April 28, after meeting the head of the IMF, Dominique Strauss-Kahn. "It is a matter for the stability of the euro zone as a whole, and we will not avoid our responsibility." Suddenly, panic is in the air. Amid fears that the Greek debt contagion could spread to other countries in the euro zone — both Spain and Portugal have had their credit ratings downgraded since Tuesday — the German Chancellor is rushing to get a deal on a Greek rescue package done within the next week.

But is it too late? Merkel's handling of the Greek plight has come under fire from opposition politicians and economists. "The reluctance of Chancellor Merkel's government to support Greece a few months ago has worsened the country's debt crisis," Gustav Horn, director of the Macroeconomic Policy Institute in Düsseldorf, tells TIME. "The risk premium on Greek government bonds is so high now that Athens can't service its debt." Horn argues that Merkel "didn't grasp how hysterical financial markets can become" and that her vacillation was "a welcome invitation for speculators."

Merkel got a deeper understanding of the severity of the Greek debt crisis on Wednesday, when two of the most important men in the global financial system, the IMF's Strauss-Kahn and Jean-Claude Trichet, president of the European Central Bank, flew to Berlin to hold talks with her and parliamentary leaders. "We need to go fast because the situation is serious, not only for Greece but for all the euro zone now," Strauss-Kahn said at a press conference following the meeting. The Greek drama is also reaching across the Atlantic. According to White House spokesman Bill Burton, Greece's debt crisis is "of great concern" to President Barack Obama. When Merkel and Obama spoke on Wednesday, German government officials said the Greek crisis was "a major part" of their conversation, and in a statement, the White House said the two leaders "discussed the importance of resolute action by Greece and timely support from the IMF and Europe to address Greece's economic difficulties."

But while Merkel has given the green light for a Greek rescue package — as critics predicted she would — she may end up writing a much bigger check than she thought. Members of the euro zone and the IMF had earmarked about $60 billion in loans for the bailout. Germany, as Europe's biggest economy, was due to pay the lion's share of the euro zone's loan, some $11 billion. But on Wednesday, Jürgen Trittin, the parliamentary leader of the Green Party, revealed that Greece could require up to $160 billion over the next three years. "There is a consolidation need amounting to between $132 billion and $160 billion over three years," Trittin told reporters. He had just held three hours of talks with Strauss-Kahn, but the IMF head refused to confirm the new figure, saying the details of the rescue package were still being hammered out.

Still, the mere idea of Germany paying more than was originally billed — up to $33 billion — sparked renewed outrage among the country's tabloid newspapers, which have been on a populist and vitriolic anti-Greece rant for the past several months. "Greeks want yet more billions from us," bellowed the daily paper Bild. "Will Greece become a bottomless pit?" The Greek-bashing has struck a chord among Germans who are overwhelmingly opposed to giving Greece a financial lifeline. At a time when Germany struggles with its own budget deficit — with the government denying funding for, among other things, new schools and a rise in pensions — it's difficult for many Germans to appreciate why they should help Greece. The topic has dominated TV talk shows and radio phone-ins — time and time again, commentators poke fun at the Greeks' alleged profligacy, extravagant lifestyles and "luxury" pensions.

The increasingly sour public mood is not lost on Merkel, whose Conservative Party is facing a key state election in Germany's most populous state, North Rhine-Westphalia, on May 9. With polls showing support slipping for the alliance between the ruling center-right Christian Democratic Union and the Free Democratic Party, the regional government risks losing its majority. Analysts say Merkel "misjudged" Greece's debt problems by keeping her options open to avoid frightening voters. "Chancellor Merkel thought an ill-defined conditional commitment of support to Greece would be sufficient to calm the country's debt crisis," Irwin Collier, political scientist at Berlin's Free University, tells TIME. "She wanted to keep German voters happy by not rushing to help Greece, but in reality, overwhelming force is urgently needed." Collier contends that Merkel's leadership has been seriously undermined and that voters are likely to punish her coalition in the state government when they go to the polls next week.

But before then, the Greek rescue package has to go through the German Parliament — both the lower and upper houses. On Thursday, opposition parties agreed to fast-track legislation that would enable the German state-owned development bank KFW to grant loans to Greece. The aim is to push the law through by May 7. Some lawmakers from the opposition Social Democrats said they would support the deal only if private banks contributed to the package to share the burden with taxpayers; they also called for tougher international financial regulations to prevent a repeat of the Greek crisis. Meanwhile, ECB president Trichet is ratcheting up the pressure on German policymakers. "What we need most at this time is a strong sense of direction," he said at a business conference in Munich on Thursday. With the stability of the euro zone at stake, this time Berlin seems to be listening.