Merkel dismisses talk of increasing EU stability facility

GERMAN CHANCELLOR Angela Merkel has dismissed speculation about enlarging the European Financial Stability Facility (EFSF) for…

GERMAN CHANCELLOR Angela Merkel has dismissed speculation about enlarging the European Financial Stability Facility (EFSF) for a second time, as the first enlargement goes before the German parliament tomorrow.

Ahead of talks in Berlin last night, Greek prime minister George Papandreou insisted his government was making a “superhuman” reform effort and warned Germans that sniping about Greece was “frustrating”.

“After this period of pain, I promise you that we Greeks will soon fight our way back to growth and prosperity,” he told the Federation of German Industries. “If [Greek] people feel only punishment and scorn, this crisis will not become an opportunity – it will become a lost cause.”

Acknowledging Greek “mismanagement” in the past, Mr Papandreou said that rather than “blaming each other” for the euro’s stability problems a united reform effort was required.

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Mr Papendreou’s Berlin engagement yesterday came at a crucial moment for the German leader ahead of tomorrow’s EFSF vote in the Bundestag.

Dr Merkel said she had “complete respect” for the reform measures in Athens. “I’m aware that a lot is being demanded of the people in Greece, that those being asked to make savings and do without are often people who had nothing to do with the debt crisis.”

Promising “every assistance” to help Greece win back investor confidence, she said this help was conditional on a positive verdict from the EU/IMF/ECB troika on Greek’s reform progress.

Ahead of talks with the Greek leader, she rebuffed talk of pooled euro-zone debt and said Berlin was “not available” for a proposed EFSF enlargement.

German officials said any such move would endanger the fund’s triple-A rating; one government source put the speculation down to weekend “confusion” over plans to increase EFSF leveraging.

“The EFSF is not being expanded. Its volume remains €440 billion, as does the upper limit for the German contribution at €211 billion,” said Dr Merkel’s spokesman, Steffen Seibert, adding that this was the “unanimous” view at a cabinet meeting yesterday.

Renewed speculation about the EFSF comes at the worst possible moment for the German leader, spreading unwelcome uncertainty ahead of the parliamentary vote.

German opposition parties have pledged their support, meaning the EFSF Bill is almost certain to pass parliament. But the German leader is determined to win enough support from her own deputies to pass the Bill.

Though she has declined to link the parliamentary vote to a confidence motion – something she fears would be perceived as a sign of political weakness – Dr Merkel hinted yesterday that the government’s future would be in doubt if deputies voted against the Bill or abstained.

“That’s something I don’t need,” Dr Merkel warned deputies of her Christian Democratic party (CDU) at a closed-door session yesterday afternoon. “We’ve got far too much to do together.”

At the last count, Dr Merkel is five deputies short of her own absolute or “chancellor” majority in the Bundestag, but a CDU official said last night the doubters were being “worked on energetically”.

Leading bailout critics in her coalition, particularly in the Free Democrats junior partner, have conceded that tomorrow’s vote is likely to pass with a government majority. They are now concentrating their efforts on blocking the permanent rescue facility – the European Stability Mechanism – when it goes before the Bundestag in the new year.