Article
"We need the euro. The euro is good for us."
On Thursday the German Bundestag will be voting on the new guarantees offered by the European Financial Stability Facility and the redrafting of its powers. The Bundesrat or second chamber will vote one day later in a special session.
New instruments to support heavily indebted euro-zone states
The euro-zone rescue fund, known officially as the European Financial Stability Facility, or EFSF, is to have at its disposal new instruments to enable it to support heavily indebted euro-zone states. This was decided by the heads of state and government of the euro-zone states. In future 440 billion euros are to be available to be used as loan guarantees for struggling euro-zone states, as compared to the current total of 250 billion euros. State guarantees will thus rise to around 780 billion euros as compared to the current total of 440 billion euros. Germany’s share is to rise from 123 billion euros to 211 billion euros.
The European rescue mechanism as of 2013
The new instruments are also to apply to the permanent European Stability Mechanism (ESM) in line with the agreement reached by the heads of state and government on 21 July. The ESM is to be launched in mid-2013 and will replace the current recue fund, the EFSF. The ESM too will only be used under very strict conditions, and there are plans to involve private creditors. The German government is convinced that the efforts will manage to guarantee the lasting stability of the euro.
Preventing “infection”
“What concerns us today is that Greece’s problems could “infect” other countries,” said Angela Merkel. “We must react to this concern, and erect a barrier.” This is why the “long-term, permanent European Stability Mechanism is an entirely different ball game”. The planned extension of the euro-zone rescue fund is also necessary, according to Chancellor Angela Merkel, to provide for the possibility of euro states declaring insolvency at a later date. What is even more important than the beefed-up guarantees, she said, “is the fact that this mechanism will be able to ensure that one country within the euro zone does not go on to infect one country after another,” said the Chancellor. “This is absolutely essential, so that a state really can be declared insolvent under the new permanent European Stability Mechanism (ESM).“
Rights of the German Bundestag strengthened
The German Federal Constitutional Court has already approved the package of aid for Greece and the euro-zone rescue fund. At the same time the judges strengthened the rights of the German Bundestag. Future financial aid must be approved at every stage along the way by the Budget Committee of the Bundestag. Chancellor Angela Merkel admitted that the situation is serious, but stressed that it is well worth the effort to retain the values of the European Union. It is, however, essential to tighten up the stability obligations of the euro-zone states in future, she added. All states should introduce a ceiling on permissible new debt just like Germany, she said.
