German Government Asks Parliament to Back Spain Recapitalization

German Chancellor Angela Merkel’s government has formally asked lawmakers to back the recapitalization of Spanish banks through the euro region’s financial backstops.

The Finance Ministry in a letter dated July 16 asked parliament to support recapitalizations of as much as 100 billion euros ($122.8 billion) by the European Financial Stability Facility and the transfer of the program to the future European Stability Mechanism. The ESM won’t have preferred creditor status for loans to Spain’s banks, it said.

“The financial aid is irrefutable to safeguard the stability of the euro zone as a whole,” the ministry said in the letter, posted on the lower house’s Internet site. Stripping the ESM of preferred creditor status is an “exception for this individual case and serves to preserve Spain’s access to markets.”

Lawmakers are due to vote on the recapitalization of Spanish banks in the lower house of parliament in Berlin, the Bundestag, on July 19. Merkel will get “the majority she needs,” Steffen Seibert, her spokesman, told reporters at a regular government press conference July 13. Finance Minister Wolfgang Schaeuble will address lawmakers at the plenary meeting that day.

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