Postponing crisis? Germany approves EU bailout fund

Postponing crisis? Germany approves EU bailout fund



30 June, 2012, 11:26

German Chancellor Angela Merkel addresses German lawmakers before they vote on the EU fiscal pact and permanent ESM bailout fund, at the lower Bundestag house of parliament in Berlin on June 29, 2012 (AFP Photo/Adam Berry)

LINK TO VIDEO: http://www.rt.com/news/germany-votes-eu-bailout-fund-110/

The German parliament has voted in favor of the EU’s permanent bailout scheme and more lenient budget rules. Chancellor Merkel has been criticized with making a U turn in policy, easing borrowing costs on flagging banks without additional austerity.
"Today Germany, with the approval of the fiscal pact and the ESM [European Stability Mechanism] by all parties in both houses of parliament, will send an important signal … that we are overcoming the European debt crisis in a sustainable way," Chancellor Merkel said, addressing the Bundestag prior to the vote.
Members of Merkel’s two main opposition parties also backed the decision. Their support was needed as the fiscal pact stipulates changes to the German constitution and as such requires more than two thirds approval in parliament.
Merkel did minor opposition from euro skeptics within her own Christian Democratic party, however. Party member Klaus-Peter Willsch said the new measures would result in "Germany being liable for everyone".
The vote came hot off the back of an EU summit in Brussels that Merkel described as a “breakthrough” in terms of the future of the eurozone economy. During the summit EU leaders agreed on more tools to combat the swelling eurozone financial crisis, namely less stringent borrowing costs for Spanish and Italian banks.
Additionally, they introduced measures geared at allowing Brussels to recapitalize banks directly in the future, thus avoiding taxes that would be incurred if the loans went through nations’ governments.
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Democracy under threat?Beatrix Von Storch, spokesperson for the Civil Coalition Movement, told RT that the new measures were a “threat to democracy in Germany and Europe” and they are “not backed by the majority of the people.”
“The parliament is voting down democracy and handing over the power of the people to an unelected government, the ESM board of governors,” she stressed
She added that she did not understand why German policy makers were pushing ahead with a policy that uses German taxpayers’ money to bail out Europe.
“This cannot work; even Germany is not able to pay off all the debts in Europe,” she said, adding that the real problem was not being addressed and that Brussels was just paying off debts that will be “replaced tomorrow.”
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“Bailout not enough to promote growth”Dr Jack Rasmus from St Mary’s college in California called Brussel’s attempt to encourage growth through cash injections into EU banks a
“temporary move.”
Citing the example of the US economy for the past three and a half years, he told RT that although the banks were stabilized, there was no economic growth in spite of “massive liquidity injections directly into banks.”
“As long as that growth does not occur it’s going to feedback and exacerbate both the banking and the sovereign debt crisis,” he concluded.

European media reaction: Merkel “caves in” to Latin countries at EU summit



German Chancellor Angela Merkel was handed a humiliating defeat by other European countries during this week’s EU summit, according to newspapers both in her homeland and elsewhere in the Eurozone. Merkel was “blindsided” by the other leaders, wrote German tabloid Bild, and forced to make concessions that will make it easier to France, Spain and Italy to access the bailout fund without implementing further austerity measures. "The southern euro countries are taking the north hostage," summed up Dutch financial paper Het Financieele Dagblad.

German Parliament Approves Fiscal Pact and Euro Bailout Fund

By Patrick Donahue - Jun 29, 2012 3:01 PM PT


Germany’s parliament approved the European Union’s fiscal pact and the permanent euro bailout fund with clear majorities as Chancellor Angela Merkel pledged solidarity and vowed to overcome the debt crisis.

The measures won two-thirds majorities in both the lower and upper chambers, the Bundestag and Bundesrat, in sessions that stretched yesterday until nearly midnight. Returning from Brussels, where Merkel conceded to demands to offer relief to Spain and Italy at an EU summit, the German leader called the fiscal pact for budget discipline and the European Stability Mechanism “necessary” to overcome the crisis.

Angela Merkel, Germany's chancellor, center, smiles and gestures as she arrives for the second day of the European Leaders (EU) summit at the European Council headquarters in Brussels, on June 29, 2012. Photographer: Jock Fistick/Bloomberg
.“This is a signal of solidarity and determination, domestically as well as abroad,” Merkel told lawmakers yesterday before the vote in Berlin. Passage is “a signal to overcome the European sovereign debt crisis in a sustainable way -- and a signal from us that Europe is our future.”

Parliamentary approval doesn’t include Merkel’s agreement with other leaders of the 17-member euro bloc yesterday to relax conditions on bailout funding. Still, the unusual double vote underscored the insistence by lawmakers in Berlin to assert control over euro-crisis measures.

Merkel’s seeking two-thirds majorities in both houses for approval of the bills required her Christian Democratic-led bloc to make concessions to the opposition Social Democrats and Greens as well as to the German states on growth-boosting steps and a financial-transaction tax.

For Europe

Greens parliamentary leader Juergen Trittin said in a speech to the Bundestag his party backed the legislation because “we need to vote to preserve this Europe.”

Merkel said the agreed-upon process to establish a euro- area banking supervisor and enable the ESM to recapitalize banks directly “would take several months or perhaps a year.” Parliament would need to approve the changes.

The two measures now await the signature of German President Joachim Gauck, who said June 21 that he would withhold passage pending potential lawsuits to challenge the new laws, as requested by the Federal Constitutional Court.

Approval “was widely expected given the deals struck between Merkel’s CDU and the opposition in the past few days, but it still marks an important milestone,” Thomas Costerg, an economist at Standard Chartered Bank in London, said in a e- mailed response to questions.