GERMANY:OFFICIALS IN Berlin say Chancellor Angela Merkel's call to renegotiate the payment plan for the euro zone rescue fund is to free up money for German pre-election giveaways in 2013.
Three days after European Union finance ministers agreed the cash pay-in rules for the European Stability Mechanism (ESM), German negotiators insisted yesterday their change of mind was of a “technical nature” – only to concede in private a political dimension.
The ESM, designed to replace the temporary rescue fund, the European Financial Stability Facility, from 2013, will be a €700 billion fund with a triple-A rating and a €500 billion effective lending capacity. Some €80 billion cash is to be paid in by EU member states from 2013.
Berlin is earmarked to contribute half of its €22 billion contribution in 2013, just as Dr Merkel faces re-election.
Rather than have to hand over €11 billion before polling day, limiting her options for giveaways and tax cuts, Dr Merkel wants payments made in five equal annual instalments of about €4.4 billion each.
Heading into talks yesterday, German officials admitted there was still no clarity on whether ratings agencies would agree to unpick the deal they agreed last Monday with EU finance ministers.
The officials said it was unlikely they would push to rework the deal if it endangered the creditworthiness of the fund in total.
“We want a deal on the ESM and I’d be very surprised if we didn’t get a deal today,” a senior German official said yesterday, adding that the agreement could go to national parliaments after a summit in June.
As leaders discussed the broad thrust of Dr Merkel’s demand, officials worked behind the scenes to work out the technical details.
“It’s planned that the ESM would reserve for itself a preferred creditor status similar to how the IMF does,” said a senior official involved in the talks.
Before heading to Brussels yesterday, Dr Merkel made a passionate case for the single currency in Berlin. Despite multi-billion loans to bailout struggling euro zone neighbours, Dr Merkel said the euro still remained a good deal for Germany.
“The euro creates jobs, it creates economic growth. Through the end of exchange-rate fees some €20 to €25 billion is saved annually to be invested elsewhere,” she said.
“We are the ones who are making the euro and Europe fit for the future, we’re bringing personal responsibility and solidarity into an acceptable balance.”
She welcomed as a “good sign” the willingness of non-euro countries such as Denmark and Poland to accept the new competitiveness guidelines.
Her attempts however to spread optimism were dismissed by opposition politicians in a lively Bundestag debate.
“You’ve turned many pirouettes and performed many about-faces – too many – since the start of the Greek crisis,” said Peer Steinbrück, one-time Social Democrat finance minister in Dr Merkel’s first cabinet.