GERMAN STANCE:CHANCELLOR Angela Merkel has insisted the rescue plan for the euro agreed early yesterday morning can only function if member states meet German demands for greater budget consolidation and allow EU regulation of national finances.
The German leader played down concerns over the health of finance minister Wolfgang Schäuble, who was hospitalised ahead of the Brussels meeting that agreed a €500 billion rescue deal for the euro.
After weeks of back-room wrangling in Brussels, Dr Merkel and her officials worked hard yesterday to dispel the idea the deal represented a policy U-turn for Berlin or a bottomless pit for the German taxpayer. “This is a unique situation in which we are protecting our currency,” she said in Berlin. “I’d explain it to our citizens that this is about protecting the money of people in Germany.”
Foreign minister Guido Westerwelle added that the “aid isn’t for free, but only when member states do their homework”.
Government spokesman Ulrich Wilhelm said the success of the deal depended on “future consolidation efforts” of national governments but admitted member states in financial difficulties would be excused from participation in the bilateral loan scheme. “It makes no sense that countries in difficult situations themselves have to help others,” he said.
He dismissed suggestions the deal marked the “entrance to a fiscal transfer union”. But that is the impression of ordinary Germans: first estimates suggested that, of the €440 billion total, Germany’s share will be €123 billion.
That makes it the most expensive in a growing list of German guarantees, topped until now by the €100 billion-plus bailout of Hypo Real Estate (HRE) bank after speculation in a Dublin subsidiary. The weekend deal has left experienced German economists at a loss for words.
“This the biggest all-in in history,” said Prof Henrik Enderlein of Berlin’s Hertie School of Governance on German radio, calling the plan a “bulwark that sends the right signal at the right time”.
Many German economists qualified their praise for the deal yesterday, suggesting it would only prove its worth if it withstood attacks from speculators. That, in turn, could only happen if there was confidence that the money promised could, in a worst-case scenario, actually be raised.
“This is the last bullet so it has to work,” said Commerzbank chief economist Jörg Krämer, calling the deal the “end of the Maastricht model” of currency union.
That will set alarm bells ringing in the ears of leading Germany constitutional lawyers and open the door to further challenges in Germany’s highest court.
Last week’s Greece deal has already prompted applications at the constitutional court that Germany is breaching strict anti-bailout rulings in an earlier court ruling on the Maastricht Treaty.
Government sources said there was no expectation Mr Schäuble would be leaving the finance ministry, despite ongoing health problems that saw him hospitalised on Sunday after an allergic reaction to new medication.