German Lawmakers Win Merkel Government Assurances on Spain Aid

German coalition lawmakers won assurances from Chancellor Angela Merkel’s government that they will be consulted on every step of the Spanish bank rescue to ensure that Spain remains liable for the aid awarded.

“The German parliament will be involved all the way,” Michael Fuchs, deputy parliamentary leader of Merkel’s Christian Democratic Union party, said in an interview in Berlin today. “We want to make sure there are no tricks,” that there is no “circumventing state liability.”

Lawmakers are meeting in Berlin for a special session of the lower house on aid for Spain that forced parliamentarians to interrupt their summer break. While they are poised to vote in favor of the rescue, many demanded reassurances that German taxpayers’ money will be channeled via the Spanish government and not go directly to banks themselves.

Finance Minister Wolfgang Schaeuble, who will open the debate at 2:30 p.m. Berlin time, held talks on the aid with coalition lawmakers today after briefing members of the Budget Committee last night.

“Schaeuble reassured us today that there will be no possibility to sidestep the liability issue in the process of transferring Spanish bank rescue aid” from the temporary rescue fund to the permanent European Stability Mechanism, Fuchs said.

Chancellor’s Majority

Merkel’s coalition controls 330 of the 620 seats in the lower house of parliament, the Bundestag. She needs 311 of those votes for the so-called chancellor’s majority she failed to secure twice this year, when parliament backed the second aid program for Greece and when it approved the ESM. Both measures passed with support from the opposition.

Merkel’s Christian Democrats and their Christian Social Union Bavarian sister party held a test vote on the Spanish rescue today, Volker Kauder, the bloc’s floor leader, told reporters. With just 12 dissenters, the bill is sure to pass, he said.

Parliament will have to vote again on details of the changeover from the current rescue fund, the European Financial Stability Facility, to the planned permanent fund, Hans Michelbach, a senior CSU lawmaker, told reporters.

Coalition lawmakers pressed Merkel’s government to ensure that parliament will have a right to veto rule changes to the EFSF that would allow direct bank aid, Michelbach said. “That means parliament will have to take a decision again on the new modalities at the changeover to the ESM,” he said.

“What was important for us is that the Spanish state accepts liability,” Michelbach said. “There isn’t any direct bank aid. Disbursements are made to the bank rescue fund, but it’s very clear and has been clarified in the discussion that the Spanish state carries final liability.”

While lawmakers are poised to approve aid to recapitalize Spanish banks, they aren’t paving the way for broader debt-sharing across the euro region, Michelbach said.

“Critics say these are the first steps toward a mutualization of European bank rescues,” Michelbach said. “I don’t see it that way.”

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