German Parliament to vote on Spanish bank aid

Spain bank bailout.jpg

Chancellor Angela Merkel said on Sunday she was confident that a majority of German lawmakers would back aid for Spain's ailing banking sector at a special sitting of the lower house Bundestag set for Thursday (19 July).

Euro zone finance ministers agreed last Monday on a rescue package of up to €100 billion for Spanish banks, which have been crippled by a burst housing bubble.

Merkel's government needs a green light from the Bundestag before Finance Minister Wolfgang Schaeuble can commit at a meeting of euro zone finance ministers on Friday to pay out Germany's share of the bailout.

"We always get the majority we need," Merkel said in a pre-recorded interview for ZDF television channel due to be aired on Sunday evening.

Parliamentary politics

Michael Grosse-Boehmer, chief whip of Merkel's conservatives and Volker Kauder, the conservatives' parliamentary leader, both said in newspaper interviews on Sunday they were confident Merkel would get a majority, even if it was not absolute.

But Grosse-Boehmer also sounded a cautious note, saying while the vast majority of her Christian Democrat Party (CDU)supported Merkel's course of action, some members of parliament were questioning whether they could support her on this issue.

"Everyone is aware of the concerns of the people in their electoral districts," he told Spiegel news magazine.

A small minority of lawmakers from Merkel's centre-right coalition voted recently against the euro zone's new bailout fund and new budget rules, highlighting the growing unease in Germany about the costs of supporting weaker members of the single currency bloc.

Merkel's government easily won a two-thirds majority for the two measures, however, with the help of opposition parties.

On Sunday, Merkel also said the euro zone had not yet resolved the issue of whether its bailout funds – the European Financial Stability Facility and its eventual successor, the European Stability Mechanism (ESM) – or recipient states would be liable for future aid payments to banks.

"We have not yet adopted a final position on how to solve the liability issue if a (pan-European) banking supervisor can intervene in national banks, if it can restructure them and if it can set conditions for them," she said.

The conservative leader reaffirmed her stance that the price of continued support for euro zone countries in difficulty must be strict adherence by the governments concerned to tough fiscal targets and close European monitoring of their progress.

"All attempts … to say 'oh let us practice solidarity and nonetheless have no supervision and no conditions' will stand no chance with me or with Germany," Merkel said.

Opposition conditions

Opposition Social Democrat parliamentary whip Thomas Oppermann s aid on Sunday Merkel should not take his party's support for granted.

"The chancellor must always have an absolute majority in key issues. That is also true of the aid for Spain. A decision on an aid packet of more than €100 billion is not a secondary issue," he said in a statement.

The opposition often takes this line before votes but in fact Merkel only needs a simple majority of votes, not an absolute majority, to win approval for the Spanish aid package.

Oppermann has previously told Spiegel Online his party would vote in favour of the aid for Spanish banks under the EFSF but said: "Spain must commit itself to creating a new, healthy banking system."

Troika report due on Greece

On Greece, Merkel said she wanted to wait for a report from the 'troika' of lenders on Athens' reform progress before deciding on further steps.

The troika of officials from the European Commission, the European Central Bank and the International Monetary Fund has begun a review of Greece's faltering progress after weeks of political paralysis during the election campaign.

Greece, just weeks away from running out of cash, wants to renegotiate the terms of its €130 billion rescue plan with the European Union and IMF, but the lenders – led by Germany – have said they can adjust but not rewrite the document.

"I have firmly resolved that I will only say what we will do on the basis of this (troika) report and we must therefore wait for another couple of weeks," Merkel said.

Eurozone ministers agreed on 10 July to grant Spain an extra year until 2014 to reach its deficit reduction targets in exchange for further budget savings and set the parameters of an aid package for Madrid's ailing banks.

The eurogroup is set to meet again on 20 July to approve the first €30 billion of Spain’s €100 billion bank bailout plan from the rescue fund.

Banks in eurozone countries that are complying with EU budget discipline rules will be able to access the bloc's bailout funds directly, under an agreement announced last month (29 June) at an EU summit in Brussels.

  • 20 July: Euro zone finance ministers to agree the first €30 billion payment of Spain's bank bailout plan.

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