German Finance Minister Wolfgang Schaeuble overcame resistance among key coalition lawmakers to paying into a permanent euro backstop, the ruling party’s budget spokesman said.
“It’s logical that budget committee members don’t jump for joy when 22 billion euros ($31 billion) have to be paid cash into a fund,” Norbert Barthle, the parliamentary budget spokesman for Chancellor Angela Merkel’s Christian Democratic Union, said in an interview. “But after listening” to a presentation by Schaeuble in Berlin yesterday, lawmakers see this as “a better solution than expanding the guarantees.”
Barthle’s comments suggest that lawmakers will approve Germany’s contribution to the creation of the 500 billion-euro European Stability Mechanism in 2013, after finance ministers agreed on its shape at a meeting in Brussels two days ago. The ESM is part of a package of debt crisis-fighting measures due to be ratified at a March 24-25 summit of European Union leaders.
In a non-binding resolution passed by Germany’s lower house of parliament on March 17, lawmakers mapped out what they expect from Merkel at the summit. While Merkel’s bloc and its Free Democratic Party ally failed to block bond purchases by the post-2013 ESM, Barthle said they got most of what they wanted.
“We’ve reached many of the goals laid down in our resolution: there won’t be any automatic transfers and there won’t be any euro bonds,” Barthle said in Berlin late yesterday. “For any extension of aid, important conditions have to be met.”
Germany’s capital share will be 27.1 percent of the total, Schaeuble told reporters after the March 21 meeting of finance ministers. Ministers agreed that half of the ESM capital must be paid in by 2013 and the rest later, in three annual installments. Germany, as Europe’s biggest economy, is already the biggest contributor to last year’s 177.5 billion euros in aid for Greece and Ireland.
Merkel told lawmakers yesterday that she will seek at this week’s summit to stretch out capital payments into the ESM from 2013, a federal election year in Germany, to keep some leeway for possible tax cuts, two CDU party officials said on condition of anonymity because the briefing took place in private.
The chancellor, whose party will contest two state elections on March 27, is under public and political pressure to minimize the amount that Germany pays to help snuff out the crisis.
Germany’s parliament insists that it has to approve individual aid measures and may put demands to the chancellor before any votes at EU level, thus preserving “parliament’s sovereign right” of the purse, Barthle said.
“We will certainly include the involvement of parliament in the law that governs the terms of the ESM,” Barthle said. “How this is done, whether parliament as a whole has to be involved or whether it’s in the hands of the budget committee, still has to be negotiated.”
Barthle said he can live with the decision to fund the ESM by paid-in and callable funds, saying that continued reliance on guarantees would have boosted the capital requirement to about 1 trillion euros. The ESM will draw on 80 billion euros of paid-in capital and 620 billion euros of callable capital, enabling it to lend the full 500 billion euros.
Merkel and Schaeuble managed to “stabilize the euro, protect the economy and the labor market and set the conditions for improved economic policy in other countries,” Holger Schmieding, chief economist at Joh Berenberg Gossler & Co. in London, said on Deutschlandradio public radio today. The government “has negotiated in an excellent way so far.”