GERMANY:THE BUNDESTAG has given German chancellor Angela Merkel overwhelming support to negotiate a comprehensive package of euro zone crisis measures in Brussels, including steps to increase the financial firepower of the €440 billion European Financial Stability Facility.
The resounding vote yesterday, by 503 votes to 89, with four abstentions, followed an appeal by the chancellor for a clear signal of Germany’s determination to stabilise the euro zone and prevent further contagion from the Greek debt crisis.
“The world is looking at Germany and Europe,” Dr Merkel said in her speech to the parliament. “It is looking to see if we are ready and able to take up our responsibility during the worst crisis in Europe since the second World War. If the euro fails, Europe will fail and that must not happen.”
She said euro zone leaders were aiming to reduce Greece’s outstanding government debt to 120 per cent of gross domestic product by 2020 – a target that would mean a substantially increased contribution from private creditors than the 21 per cent “haircut” originally proposed in July.
Dr Merkel spelled out the need for a big new effort to avoid an outright Greek default, combined with more financial resources to prevent further contagion to other countries in the euro zone.
The chancellor did not put a figure on the likely contribution from bondholders but she did say that the euro zone states must ensure in return “that there is a firewall against the danger of contagion” to other euro zone countries.
Only the far-left Linke party voted en masse against a cross-party resolution giving the government a green light to “leverage” the capital of the EFSF. There were also several rebels among supporters of Dr Merkel’s centre-right coalition who voted No or abstained.
Speaker after speaker in the Bundestag warned of the danger of contagion in the euro zone, but also called for tighter regulation of banks and other financial institutions as part of the necessary response to the crisis.
Dr Merkel and her government were strongly criticised for failing to spell out sooner the need to “leverage” the EFSF in order to redouble the financial resources to prevent contagion affecting the debt markets for countries such as Italy and Spain.
Frank-Walter Steinmeier, parliamentary leader of the Social Democrats, said the government had blatantly hidden the truth about the need to bolster the rescue fund. Instead of being honest with the German people, it had destroyed their trust, he warned.
However his party went along with the resolution to give the government a negotiating mandate, the first time the Bundestag has been given the right to block Germany’s negotiating position in Brussels. The pro-Europe Greens also backed the government.
The resolution calls for Germany to back proposals by the European Commission for a financial transaction tax in the EU, to discipline financial trading.
In her speech Dr Merkel said Germany’s financial guarantee of €211 billion to the EFSF would not be exceeded. – (Copyright 2011 The Financial Times Limited)
