Bundestag backs Cyprus aid and Irish loan extensions

Finance minister Wolfgang Schäuble said continued support for crisis-hit countries was essential to stabilise the euro but insisted that fiscal discipline was the “only way” back to financial health.

"Ireland and Portugal have made enormous efforts to consolidate their budgets, to stabilise their banking sectors and make their economies competitive once more," he said. "They are on a good path, Ireland is about to return to capital markets."

This deserved greater recognition, he added, particularly given the “tough times” being felt in crisis countries.

Mr Schäuble said it was correct to impose losses on investors in the two largest Cypriot banks because “higher interest rates mean higher risks and when these risks materialise they have to be accepted”.

In a nod to the new Alternative for Germany party, demanding a euro zone breakup, Mr Schäuble insisted that the "people in Germany know that . . . without the stabilising effect of the common currency, from which we profit the most, our prosperity and social security would not be secure for the future".

Critical tone
Both Cyprus assistance and maturity extensions comfortably passed the Bundestag, but the tone of the debate was more critical than in the past.

The opposition Social Democrats (SPD) and Greens voted in favour but stepped up their criticism of Berlin's austerity-heavy measures, warning that they were squeezing the economic life out of the euro zone.

SPD Bundestag leader Frank Walter Steinmeier said it was time to shatter the taboo of "dumping" tax rates in Cyprus and other euro crisis countries.

“It’s not on to have an easy life for a few years and then demand the solidarity of taxpayers in the neighbourhood,” he said. “That has to end – in Cyprus and the rest of Europe.”

Mr Frank Schäffler, a bailout critic in the Free Democrat (FDP) junior coalition partner, said the Irish crisis narrative was “the opposite of everything we’ve been told”.

“If everything was going fine there we wouldn’t have to extend the maturities on the loans,” he said. “In the end the Irish state has €20 billion less in interest payments because the ECB simply printed money. Whoever continues this path will ruin the (single) currency.”