GERMAN REACTION:GERMAN FINANCE minister Wolfgang Schäuble has insisted the Spanish state carries ultimate responsibility for ensuring the bailout of its banks is repaid.
Germany was happy to see Spain ready to apply for a bailout for its finance sector, but Mr Schäuble reiterated Berlin’s insistence that funding would not pass directly to the banks in question but through Madrid – ensuring a state guarantee on aid.
News that Europe is soon to have a fourth bailout country comes amid reports that European Union officials will push for euro zone leaders to accept peer review of all future borrowing at this month’s EU summit.
“Spain carries the liability, Spain has to pay it back, Spain has oversight of its banks and will distribute it,” said Mr Schäuble.
“Spain will present and negotiate a restructuring programme for its banks to the European Commission, the European Central Bank and the and then the necessary capital will be provided.
He welcomed Spain’s announcement that it would seek a bailout and expressed optimism that its European partners were able to supply up to €100 billion – far more than early estimates believe will be required.
This latest bailout is likely to be a tough sell at home for the German government, with a poll yesterday indicating two-thirds of Germans opposed to supporting Spanish banks with German money.
Complicating matters further are reports of renewed uncertainty over Germany’s joint ratification of the fiscal treaty and European Stability Mechanism bailout fund between government and opposition. Last week opposition leaders agreed in principle to throw their crucial parliamentary support behind the vote, guaranteeing the government cleared the two-thirds majority required to ratify treaties. In return, the government agreed to the opposition’s demand to push for a financial transaction tax at European level.
Opposition leaders reacted angrily yesterday to reports that senior officials of Chancellor Angela Merkel only made the promise because they believe there is no chance of it being agreed before German’s autumn 2013 general election.
Thomas Oppermann, senior member of the opposition Social Democrats, described this as a “blow to the fiscal pact talks”.
“We need an irreversible commitment to introduce a financial transaction tax,” he said. “There will be no formulaic compromises with us.” Green Party politician Volker Beck warned the government that “whoever plays tricks risks the failure of the fiscal pact”.
Without German opposition support the fiscal treaty – and thus the ESM – will not pass before the summer break.
Ahead of a Spanish bailout, Bundesbank president Jens Weidmann has called for “clarity” about whether EU members want to keep responsibility for budgets at national level – “limiting the level of joint liability” – or dare to go the path of a “fiscal union”.
His remarks come amid reports that European officials, lead by European Council president Herman Van Rompuy, are planning just such a union, with member states no longer allowed decide alone on new borrowing.
According to Der Spiegel, the plan being drafted in Brussels would allow national finance ministers sole discretion only over income raised through tax takings.
“Whoever needs more money than they raise themselves, would have to register its requirement with the euro zone finance ministers,” the magazine said, citing official involved in the talks. These applications would be examined and, if approved, debt could be raised in jointly issued eurobonds or mutualised debt notes.
This financing would be overseen by a full-time official who, in future, could become European finance minister. This body would only be responsible for new borrowing, not existing structural debt, according to the draft, and its work would be overseen by representatives of the national parliaments.
