Merkel attacked over eurozone crisis stance by ex-mentor Kohl
German Chancellor Angela Merkel was engulfed in further controversy over the eurozone debt crisis last night as political allies attacked her position, including one of her predecessors Helmut Kohl.
Ms Merkel, who has firmly ruled out eurobonds and expanding the European rescue fund, also found herself under attack from a minister in her own party -- who insisted that Greece must give up collateral for any loan assistance it is receiving.
Mr Kohl, a mentor of Ms Merkel earlier in her career, said nobody seemed to know in what direction Germany was headed anymore.
He said the EU must stand by Greece no matter what and he castigated Ms Merkel for apparently changing her position too often. "The enormous changes in the world can be no excuse for having no view or idea where you belong and where you are going," he said.
He also said Ms Merkel had reduced Germany's influence over the US. "We must take care that we do not gamble everything away."
Meanwhile, a minister in Ms Merkel's conservative party propelled Germany into a debate about guarantees on bailout payments to Greece, backing a demand from Finland for collateral. Berlin, however, distanced itself from her comments.
Labour Minister Ursula von der Leyen, also a deputy president of the chancellor's Christian Democrats, told German TV that future bailouts should only be made against guarantees.
"Several states are making big efforts to service their debt. This must be honoured. But to keep up those efforts in the long term, collateral is needed," the minister was quoted as saying.
One official responded by saying her comments were not the German government's position and that the most important thing was to link aid under the European Financial Stability Facility to "strict conditions" regarding fiscal reforms.
Greece agreed last week to provide AAA-rated Finland with cash collateral for the loans in a plan that sparked requests for similar treatment from Austria, the Netherlands and Slovakia.
Austria has been an outspoken critic of the bilateral deal and said on Tuesday it was one of "many" eurozone countries with concerns about unfair treatment.
The collateral question could threaten the entire second bailout. However, market analysts think it is more likely that a deal will be reached.
"The Finnish collateral deal was agreed on July 21 and all sides were aware of it, so I think Finland and the other lender countries will find a compromise on that paving the way for the second bailout," said Padhraic Garvey of ING Bank.
Analysts say any new signs of discord in the eurozone could fuel market fears that its political leaders are incapable of getting on top of the debt crisis.
Ratings agency Moody's said on Monday that eurozone states seeking collateral for Greek aid should think again if they wanted to avoid driving the debt-mired state into default.
Meanwhile, German finance minister Wolfgang Schaeuble said countries that share the euro would one day need a common financial policy.
"One day we will have to adopt a common financial policy in Europe, after having a common monetary policy," Mr Schaeuble told a conference in Frankfurt.
Reflecting all the uncertainty, the yield on Greek government bonds hit a record high last night as fears grew that even with a second bailout the country could still face insolvency in the coming years.
The yield, or interest rate on Greek bonds due to be repaid in two years, rose to a staggering 44pc for the first time yesterday.
In marked contrast rising confidence in the markets about Irish longer-term prospects pushed the yield on 10-year Irish government bonds below 9pc for the first time since February.
"Ireland is being rewarded for doing a decent job," said Mr Garvey.