German lower house passes euro rescue package

21st May 2010, Comments 0 comments

Parliament's lower house approved the German share of a trillion-dollar rescue package for debt-stricken eurozone countries Friday, after Chancellor Angela Merkel warned the euro was "in danger".

Merkel's centre-right majority in the Bundestag handily assured passage of the bill to unblock up to about 150 billion euros (187 billion dollars) of the around 750 billion euros in loan guarantees.

The Bundesrat upper house was to pass the the so-called "shock and awe" package, cobbled together by the European Union and International Monetary Fund, later Friday.

Finance Minister Wolfgang Schaeuble told the Bundestag that approval of the package was crucial to market stability.

The bill must be passed "because markets trust it only once it has actually been implemented," he said. "It is a reality that markets look more at Germany than at Cyprus or Malta."

Germany approved the rescue package two weeks after a 110-billion-euro bail-out deal for debt-wracked Greece, which was hugely unpopular and contributed to a crushing setback for Merkel this month in a key state poll.

This week she tried to impress upon Germans the importance of the measures, saying that the euro was "in danger" and warned of "incalculable consequences" for the EU if the euro were to fail.

The doomsday language drew a sharp rebuke from French Economy Minister Christine Lagarde.

The crunch vote in Europe's top economy came as Merkel prepared to hold her first talks with new British Prime Minister David Cameron, who took office last week.

It also coincided with the first meeting in Brussels of a new EU economic task force aimed at bolstering economic and budgetary oversight among member states to head off future debt turmoil.

The Brussels meeting of European finance ministers comes amid amid financial market doubts about Europe's unity in the face of the debt crisis.

The Berlin daily Tagesspiegel said Europe was not only at a fiscal crossroads, but also mired in deep political confusion.

"The main reason why the euro has been targeted is connected to European discord," the newspaper said. "The recognition that discord and negligent budgeting have weakened the euro ought to lead to an immediate change of tack."

Merkel has faced accusations of shaky leadership during the crisis from abroad and even within her own conservative bloc.

On Friday, Horst Seehofer, leader of the Christian Social Union, the Bavarian sister party of Merkel's Christian Democrats, skewered the chancellor over what he called a skittish approach that hurt German interests.

He fumed that Merkel and Finance Minister Wolfgang Schaeuble had waffled in presenting an international financial transaction tax. The two said they would be willing to implement the tax just in the eurozone even if Britain and the United States did not follow.

"It's not acceptable for us to signal publicly to our negotiating partners in London and Washington, from whom we want something, that they shouldn't get so nervous because while we may have decided something, we know that you won't agree anyway," he told the daily Sueddeutsche Zeitung.

Despite assertions that there is no alternative to the European rescue package, Merkel has also raised doubts, saying it only "buys time" until the mounting deficits of certain eurozone members are tamed.

Some analysts warned the package will be an enormous burden on Germany with little real pay-off.

Economist Hans-Werner Sinn, head of the influential Ifo institute, on Thursday called it "one of the gravest and most wrong decisions in the history of the federal republic."

© 2010 AFP

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