European politicians are trying to avoid too much talk of a multi-trillion-euro revamp of the eurozone’s crisis strategy ahead of a crunch vote in the German parliament, with the German finance minister denying plans for such an increase to the bail-out fund and French ministers saying it is necessary to stay quiet until after the vote.
On Tuesday, German finance minister Wolfgang Schaeuble told N-TV: “We do not intend to increase it,” and separately called such moves “stupid”.
“I don’t understand how anyone in the European Commission can have such a stupid idea. The result would be to endanger the AAA sovereign debt ratings of other member states. It makes no sense,” he said.
It is understood that European leaders are considering a plan to leverage the European Financial Stability Fund via the European Central Bank. The sums mentioned are in the range of €2 trillion, although sources have said, the figures are still in flux and that more than one option is on the table.
Meanwhile, changes strengthening the EFSF agreed by eurozone leaders in July have yet to be approved by the Bundestag. A vote is scheduled for Thursday.
French finance minister Francois Baroin for his part said that a public discussion of the issue could not happen before Germany votes
“It is out of the question to put forward, three days from the Bundestag (lower house) vote, the issue of whether we should increase the fund,” he said. “Let’s not open Pandora’s box on something that is a red flag for Germany.”
Meanwhile, Prime Minister Francois Fillon told the French parliament that plans to tackle “speculative attacks” would be unveiled after the German vote.
A straw poll amongst MPs from German Chancellor Angela Merkel’s CDU and sister party in the CSU group in the chamber showed how tight the vote could be.
Some 11 MPs voted against moves to alter the EFSF’s rules, according to a report from Reuters, while two abstained. The news agency quoted unnamed sources that predicted between two and five nays from the coalition’s Free Democrat junior partner and a further six abstentions. If 19 deputies vote against or abstain, Merkel will have to depend on opposition Social Democrat and Green votes, a development that could fatally wound the Merkel administration.
Separately, Greek Prime Minister George Papandreou travelled to Berlin to meet with his German counterpart and delivered a rousing speech to German industrial leaders in an attempt to rally spirits in the key European economy.
“I promise you, we Greeks will soon fight our way back to growth and prosperity after this period of pain,” he told the Federation of German Industries.
“The eurozone must now take bold steps toward fiscal integration to stabilise the monetary union. Let’s not allow those who are betting against the euro to succeed,” he said.
Merkel for her part stressed that Berlin will not abandon Athens: “We will provide all the help desired from the German side so that Greece regains trust.”
“If the stability of the euro is at stake – and the experience of the last few years shows that the difficulties of one country endanger our common currency – then that obliges us to show solidarity within the common currency.”
“We want a strong Greece in the eurozone… Germany is ready to give all the help that is required.”
Source: EUobserver, OEIC staff