German parliament set to green-light euro rescue package

21st May 2010, Comments 0 comments

The German parliament was set to unblock its share of a trillion-dollar rescue package for debt-stricken eurozone countries Friday, after Chancellor Angela Merkel warned the euro was "in danger".

Hours before Merkel holds her first meeting with new British Prime Minister David Cameron, the Bundestag lower house of parliament was due to vote on the measures to shore up European economic stability amid a raging fiscal crisis.

The Bundesrat upper house was then expected to rubber-stamp the "shock and awe" emergency loan guarantees. Berlin is due to make available the lion's share, up to about 150 billion euros (187 billion dollars).

The crunch vote in Europe's biggest economy also comes as a new EU economic task force is to hold its first meeting in Brussels to bolster economic and budgetary surveillance among member states to head off similar turmoil in the future.

The Berlin daily Tagesspiegel said Europe was not only at a financial 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."

The emergency package comes two weeks after a 110-billion-euro bailout deal for debt-wracked Greece, which was hugely unpopular in Germany and contributed to a crushing defeat for Merkel this month in a pivotal regional election.

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 their backing for an international financial transaction tax, saying they would be willing to implement it only within the eurozone if Britain and the United States stonewalled.

"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.

In bids to shore up support for her crisis management, Merkel made two highly disputed moves this week that spooked investors and riled European allies.

At midnight Wednesday, Germany unilaterally banned so-called naked short selling -- the sale of bonds or shares by market players who neither hold the security nor have borrowed it to make their trade.

The move, targeted at speculators, sent the euro plunging to a four-year low.

Hours later, while lobbying for the European rescue package, Merkel told the Bundestag that the euro was "in danger" and warned of "incalculable consequences" for the European Union if the euro were to fail.

The doomsday language drew a sharp rebuke from French Economy Minister Christine Lagarde, who had also blasted Berlin's go-it-alone course on market regulation.

French President Nicolas Sarkozy was later forced to deny a rift at the heart of Europe.

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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