Merkel steps on brakes on bank deal

Fri, Dec 14, 2012, 00:00

GermanyAfter months flooring the austerity accelerator, German chancellor Angela Merkel appeared to arrive in Brussels yesterday with her foot on the bank recapitalisation brake.

Taoiseach Enda Kenny was anxious to exploit the momentum of the finance ministers’ dawn deal for Ireland’s ends. But the German leader, in public at least, appeared to be in less of a hurry.

“Reforms are showing the first signs of success with deficits already clearly going down,” she told the Bundestag.

“Ireland has already eliminated its deficit, unit labour costs have fallen noticeably.”

Her priority going into the Brussels chamber was not Ireland but measures to drive EU economic co-ordination and boost competitiveness. There might be other talk, she said, on other unnamed “measures for the next one, two, three years”.

Pooled debt opposed

In the Bundestag she repeated her opposition to pooled debt and “automated stability mechanisms”. The tone was unmistakeable: don’t expect any Saul-to-Paul policy shift before next September’s general election.

Her finance minister, Wolfgang Schäuble, struck a milder tone. No concrete cases of bank recapitalisations were planned for next year.

“But if during 2013, for some reason, the opinion arises that a certain bank should be recapitalised directly from [the European Stability Mechanism],” he said. “The ESM could, after a unanimous vote, lodge an application that the European banking regulator goes into operation in order to fulfil the conditions to allow a direct recapitalisation.”

In the Bundestag, opposition Social Democrat leader Sigmar Gabriel said Europe needed practical measures to push growth but Dr Merkel was on a go-slow.

She wanted a “phantom European institution debate” until election day, he suggested, to drag out a bank recapitalisation agreement that contradicted a June Bundestag motion on the issue.

Signals emerged inside and outside the summit chamber that a signal of support to everyone’s satisfaction could be found for Ireland in the coming months.

“We’re all pedantic, we’re all tough but we look at things at a case by case basis and are pragmatic,” said Alexander Stubb, foreign minister of Finland. He said Ireland was a success story and there was interest on all sides in keeping it that way.