24.02.2012
By Simon Miller
Germany faces a row with the International Monetary Fund and fellow members of the eurozone as it seeks to block any further boost to the EU bailout mechanisms.
The ruling Christian Democrat and Free Democrat parties have introduced a resolution that seeks to stop the EU from boosting its ‘firewall’ to €750bn (£635bn) either by increasing the European Stability Mechanism or running it with the European Financial Stability Facility.
The draft proposal said: “European solidarity is not an end in itself and should not be a one-way street. Germany’s engagement has reached it limits.”
It added: “Germany itself faces strict austerity to comply with the national debt brake.
With growing domestic pressure, Chancellor Angela Merkel has toughened the governmnet’s stance against an increase firewall in a bid to get the second bailout agreement through the Bundestag on Monday.
Merkel had told the Bundestag that Germany’s eurozone exposure was capped at €211bn but a boost to the EMS would see that figure go above €300bn, not only resulting in another fresh vote but also see it on a collision course with the Constitutional Court which has ruled that any rescue commitment more than a year’s budget would threaten stability and may violate basic law.
On Wednesday Merkel’s spokesman Steffan Seibert told reporters that the government’s position had not changed and that it thought an increase in the mechanism was unnecessary as conditions on the bond markets for Italy and Spain had improved since then.
He added: "What was agreed with partners (in December) was that in March there would be an examination of the size.”
However, Germany’s stance risks a major row, with the Netherlands and Finland willing to boost the firewall, and the IMF warning that it would not commit £318bn more in funds to ring-fence Italy and Spain unless the eurozone pays more.
Today (Friday) sees Greece offer its bond swap to private debt holders after its parliament nodded through the law which aims to slice €100bn of its debt bill.
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