German MPs recalled for Spain aid vote

Thu, Jul 19, 2012, 01:00

THE BUNDESTAG has summoned MPs back from their summer holidays to vote today on financial assistance for Spanish banks.

This latest bailout contribution is likely to go through, but under growing shadow of confusion.

“This bailout is necessary to stabilise banks and keep the Spanish economy alive,” said Norbert Barthle, budgetary spokesman for Angela Merkel’s ruling Christian Democratic Union (CDU).

But coalition rebels from her Free Democrat (FDP) junior partner have accused the government of withholding information on who carries final liability for the banking bailout of up to €100 billion – almost a third of which will be shouldered by Germany.

Under the current EFSF bailout rules, aid to banks must pass through European capitals, is classified as sovereign debt and is covered by a state guarantee.

Berlin insists this remains the case for Spanish aid in the future – as has Madrid. But doubts have grown since bailout fund head Klaus Regling suggested the permanent ESM bailout fund would allow direct aid to banks, leaving states “liberated from liability”.

Chancellor Angela Merkel insisted in a television interview no such decision has been taken and, pointing to a recent summit agreement, would only be discussed after a European banking regulator was established. But this has failed to disperse doubts ahead of this morning’s vote, forcing further damage limitation.

Finance minister Wolfgang Schäuble dismissed the doubts as “completely unfounded” and attacked “unclear and irresponsible comments from some individuals”.

All German contributions to European bailouts must be voted on by the Bundestag and, with just one opposition party against, a simple majority in favour is assured.

The chancellor’s officials have played down the importance of Dr Merkel winning an absolute majority among her own ranks. Last month 26 coalition MPs voted against the government in ratifying the ESM permanent bailout fund, up from 17 rebels on Greek aid in February.

Leading FDP rebel Frank Schäffler claimed yesterday the government was withholding information ahead of today’s vote that confirmed advanced plans for a direct recapitalisation of Spanish banks.

Another FDP rebel yesterday proposed the reintroduction of European national currencies for domestic transactions, with the euro retained only for export transactions.

Meanwhile ECB board member Jörg Asmussen has warned that a negative ruling by Germany’s constitutional court on the ESM fund would mean the “failure” of European crisis politics.