German bailout vote is 'too little, too late' for the eurozone - Chancellor Angela Merkel won her "own majority" for the bill, narrowly averting the collapse of her government, but only after pledging that there was no grand plan committing Germany to vast and unlimited liabilities. Horst Seehofer, leader of Bavaria's Social Christians CSU, said his party would go "this far, and no further", insisting any expansion of the rescue machinery was out of the question. "The financial markets are beginning to ask whether Germans can afford all this help. We must not risk the creditworthiness of the German state," he said. Norbert Lammert, the Bundestag's president, said lawmakers felt they had been "bounced" into backing far-reaching demands and warned that Germany's legislature would not give up its fiscal sovereignty to any EU body. Finance minister Wolfgang Schäuble said reports of a secret plot to boost the guarantees of the fund (EFSF) were scurrilous. "It will not be raised. There can be no debate about this. These suspicions are indecent," he said, acknowledging only that the money will deployed as "efficiently as possible". Officials in Berlin say Mr Schäuble has been careful not to rule out use of leverage. The finance ministry has no specific plan to lever the fund but is aware of six or seven options "floating about" – pushed by France and Brussels – that might offer a solution.
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Friday, September 30, 2011
German bailout vote is 'too little, too late' for the eurozone - Chancellor Angela Merkel won her "own majority" for the bill, narrowly averting the collapse of her government, but only after pledging that there was no grand plan committing Germany to vast and unlimited liabilities. Horst Seehofer, leader of Bavaria's Social Christians CSU, said his party would go "this far, and no further", insisting any expansion of the rescue machinery was out of the question. "The financial markets are beginning to ask whether Germans can afford all this help. We must not risk the creditworthiness of the German state," he said. Norbert Lammert, the Bundestag's president, said lawmakers felt they had been "bounced" into backing far-reaching demands and warned that Germany's legislature would not give up its fiscal sovereignty to any EU body. Finance minister Wolfgang Schäuble said reports of a secret plot to boost the guarantees of the fund (EFSF) were scurrilous. "It will not be raised. There can be no debate about this. These suspicions are indecent," he said, acknowledging only that the money will deployed as "efficiently as possible". Officials in Berlin say Mr Schäuble has been careful not to rule out use of leverage. The finance ministry has no specific plan to lever the fund but is aware of six or seven options "floating about" – pushed by France and Brussels – that might offer a solution.
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The bond crisis spread to EMU's "soft core" in August, pushing Spanish and Italian 10-year yields above the danger level of 6pc. The ECB stepped into the breach and has been buying their debt ever since to stop the crisis spiralling out of control, despite bitter protests from the Bundesbank. This is politically untenable over time. Yet the revamped EFSF is not up the task either. "The EFSF in its current guise is too little, too late," said Suki Mann from Societe Generale.
China is unlikely to come to the rescue. Jin Liqun, head of China Investment Corporation, told an Economist forum that Beijing is worried about the "unravelling of the situation" in Europe. "China cannot be expected to buy into high risk in the eurozone without a clear picture of debt workouts. Sorry if I have ruffled feathers," he said.
Stefan Homburg, head of Germany's Institute for Public Finance, said the EMU crisis had already gone beyond the point of no return. "The euro is nearing its ugly end. A collapse of monetary union now appears unavoidable. The Chancellor should have no illusions about this," he said.
"The eurozone's leaders and the ECB have breached all the stability rules, the debt ceiling, and the ban on bond purchases. This isn't the rule of law, it's the rule of the jungle," he said.
Meanwhile, the International Monetary Fund has approved an additional $675m under a standby arrangement for Romania.
The IMF said Romanian authorities “have indicated that they will continue treating the arrangement as precautionary and therefore do not intend to draw under it”.
So the euro will fail, but the EU continue? But the two are one and the same by now. Governments are now markets, the euro is the fabric of the EU. Why Greece is as secure as any other member, and as valuable, because no one needs the EUro more, and no one supports it as unflinchingly. The Project progresses on moral/not monetary support. Merkel has the conviction of honesty, Schauble that of the religious fanatic, neither of which exist in any degree in the Tag and why it blinked. Now Merkel is Germany, and the EU is Europe. And the fanatics know that even a union cemented by ruin will create an unrivaled orbit. The EU has but to survive to become the world's superpower.
How many "ends" can we possibly have by now. Where did the first 2 1/2 trill come from? You print it. They won't dare, you say. The EU is structured on the Dialectic. The can is always within a hairsbreadth of the end, only to find itself sublated again to the very beginning by the crisis. The owl must pass through a whole series of these crises, which read like prophecies to the men at the top. And why they stalk their prize so patiently.
German public opinion is firmly against any "leveraging" of the European Financial Stability Facility and both Wolfgang Schäuble, the German finance minister, and Philipp Rösler, the economics minister, set their stalls out against any such extension as the Bundestag voted 523 to 85 to increase the EFSF's available funds to €440bn (£382bn). The vote approves the increase of Germany's guarantees from €123bn to €211bn. Schäuble said any further increase, mooted after last weekend's IMF meeting in Washington, was "out of the question".
Behind the scenes, however, officials are discussing at least three options for leveraging the fund to help head off the threat of potentially catastrophic defaults across the eurozone and these talks are expected to accelerate now that Germany has approved the 21 July decision to give the EFSF enhanced powers.
"The only player that matters is Germany – despite what Sarkozy says. We can now get on with these discussions since Berlin knows they must take place no matter what ministers say in public," one senior source said. Analysts cautioned, however, that it would be unrealistic to expect a fully fledged scheme to be in place in time for the G20 summit in Cannes in early November, let alone the next EU summit in mid-October.
There remains deep anxiety that the greater urgency to resolve the eurozone's sovereign debt crisis and ward off a deep recession could yet be undermined by Slovakia, the last of the 17 countries to vote on the changes to the EFSF.
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