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Saturday, Sep 21, 2019

German parliament passes bailout bill before EU summit

German Chancellor Angel Merkel won a parliamentary vote with a large majority on Wednesday on boosting the firepower of the euro zone rescue fund, handing her a strong mandate to negotiate at a crunch EU summit later in the day in Brussels.

world Updated: Oct 26, 2011 19:49 IST


German Chancellor Angel Merkel won a parliamentary vote with a large majority on Wednesday on boosting the firepower of the euro zone rescue fund, handing her a strong mandate to negotiate at a crunch EU summit later in the day in Brussels.

The vice president of the Bundestag lower house of parliament said 503 lawmakers had voted in favour of the motion, 89 had voted against and there were four abstentions.

The parliamentary vote binds Merkel to sticking closely to the text of the motion passed by the Bundestag in her negotiations in Brussels, thus strengthening her bargaining power.

EU leaders will meet to try to agree a range of measures to tackle the spiralling euro zone debt crisis but the prospects of a comprehensive deal looked dim, with disagreements remaining in several crucial areas.

Addressing parliament before the vote, Merkel urged lawmakers to live up to their "historic duty" and said Europe was in its toughest period since the end of World War Two.

"The world is watching Germany and Europe to see if we are ready and able to take responsibility. If the euro fails, Europe fails," said Merkel.

Supported by the opposition Social Democrats (SPD) and Greens, Merkel won the vote easily but it was unclear initially whether she had to rely on the opposition to get the vote through.

Several rebels from within her own centre-right coalition had said they would vote against the motion, highlighting the struggle Merkel faces in convincing Germans of the need for Europe's biggest economy to help its indebted partners.

Merkel is battling sliding ratings for herself and her centre-right coalition over her handling of the euro zone crisis.

Critics at home and abroad have accused her of taking a dithering approach that has exacerbated the debt crisis, and frustration is rife.

The proposals, to increase the efficiency of the 440 billion euro ($610 billion) European Financial Stability Facility (EFSF) without pouring more taxpayers' money into it, are the subject of fierce debate in Europe's largest economy and biggest contributor to the rescue fund.

Disagreement on several issues remains between the 17 euro zone leaders meeting in Brussels, including on exactly how to scale up the EFSF .

One option is to use it to offer guarantees to purchasers of new euro zone debt, the other to use part of its capacity to set up a special purpose investment vehicle to attract money from sovereign wealth funds and other investors. A combination may also be possible.

Merkel said it was justifiable to take the chance of higher risks stemming from leveraging the EFSF, and failure to give the fund more firepower would be irresponsible.

She also vowed to do what she could to get Greece back on its feet quickly, although it would be a long road. European leaders should agree on what would amount to a 50 percent writedown of the Greek debt held by the private sector, she said.

"The goal of the meeting tonight must be to get a result under which Greece will by 2020 have a debt to gross domestic product ratio of 120 percent," said Merkel.

Under the sustainability scenarios put forward by Greece's 'troika' of lenders -- the European Commission, European Central Bank and International Monetary Fund -- that would mean a 50 percent writedown for private sector bondholders.

Another area of dispute overhanging the summit is over the role of the European Central Bank in the crisis. France wants a deeper and more direct ECB involvement while Germany is strongly against that.

The motion passed by the German parliament states that the EFSF cannot be financed through the ECB and that with a leveraged EFSF, the ECB will no longer need to buy bonds on the secondary market.

The incoming head of the ECB, Mario Draghi, strongly signalled earlier the bank would go on buying bonds.

German lawmakers said this was not necessarily a rebuff to them as the phrase in their motion expresses an expectation and stops short of saying the ECB cannot buy bonds if necessary.

Merkel's hands have been tied by a Constitutional Court ruling last month, which demanded a greater say for German lawmakers. That has frustrated some EU leaders eager to implement quick solutions.

Lawmakers -- either in the lower house's full session or its 41-member budget committee -- will have to be consulted again about the EU leaders' summit conclusions.

First Published: Oct 26, 2011 19:48 IST