Merkel called to explain bailout as ECB clash looms

Less than 24 hours after Angela Merkel was urged by US President Barack Obama to take the lead in managing Europe’s debt crisis, the German chancellor faces members of her own coalition who say she’s done enough.

Merkel and Finance Minister Wolfgang Schaeuble brief lawmakers in Berlin today on a second bailout for Greece, outlining a stance at odds with central bankers, French allies and German voters. That’s a circle not easily squared, said Christoph Rieger, head of fixed-income strategy at Commerzbank in Frankfurt.

By calling for bondholders to contribute a “substantial” share of the rescue, Schaeuble is “openly clashing” with European Central Bank (ECB) President Jean-Claude Trichet, Rieger said. “Either Schaeuble softens his calls or the ECB makes further concessions,” he said. “One will have to give in.”

Merkel again faces a balancing act over the debt crisis that has returned to Greece more than a year after it received a ¤110-billion ($161 billion) bailout. Besides ECB calls, Merkel must take into account voter anger over the aid and opposition from her coalition partner even as investors and fellow leaders urge Germany to step up its response.