German Cabinet approves euro fund changes

BERLIN — German Chancellor Angela Merkel’s Cabinet yesterday approved a plan to beef up the eurozone’s rescue fund, the first step toward its passage in Europe’s biggest economy. Finance Minister Wolfgang Schaeuble said the German government had “stressed its determination to secure the stability of the euro with powerful equipment at the eurozone level.” The plans now go to the German parliament, which is to start considering the changes on September 7. A vote is expected on September 29. Lawmakers have to sign off on a decision made by eurozone leaders July 21 to equip their bailout fund with new pre-emptive powers, such as the ability to buy up distressed government bonds to support their prices or extending short-term credit lines to countries before they are in full-blown crisis mode.
They also decided to bring its effective lending capacity up to the headline figure of £440 billion (US$638 billion) from the current roughly £250 billion.

Merkel now has to win over skeptics in her centre-right coalition, who view the prospect of more bailouts for debt-laden countries on Europe’s periphery with increasing unease. “It remains the case that there will only be loans from the rescue fund when there is a danger to the financial stability of the eurozone as a whole, and only in exchange for a strict financial and economic policy reform programme,” Schaeuble said. Many lawmakers are calling for parliament to be given more of a say in future bailouts. Just how much of a say it does get will be thrashed out as lawmakers finalise the legislation. On Tuesday, Michael Meister, a deputy parliamentary leader of Merkel’s conservatives, called for lawmakers to be able to vote on whether the fund helps out new countries and whether its capital is increased in future.
Merkel, in an interview with the Nordkurier daily posted Tuesday on her party’s web site, offered assurances that she takes “the rights of parliament very seriously.”

Parliament “will, in all questions (regarding) the European rescue fund, have the level of involvement that lawmakers themselves consider necessary,” she added. Before parliament considers the latest plans, Germany’s highest court is to deliver its ruling September 7 on complaints against the so-called European Financial Stability Facility, the fund that is now to be expanded, and last year’s bailout package for Greece. While it isn’t expected to strike down the rescue plans, its ruling could address the issue of parliament’s rights. Merkel’s conservative Union bloc and its junior coalition partner, the Free Democratic Party, hold 330 of the 620 seats in parliament’s lower house.

The main opposition parties have signaled support for expanding the rescue fund’s powers, but Merkel needs to secure a majority with her own side’s votes to avoid facing questions about her coalition’s future. That means she has to ensure that there are no more than 19 center-right dissenters. “I am convinced that we will achieve a majority of our own in the coalition,” prominent conservative lawmaker Norbert Barthle told Bayerischer Rundfunk radio. Schaeuble said further government decisions would follow “in the coming weeks” on a second bailout package for Greece. (AP)