Germany to OK 100-billion-euro Spanish aid package
By Richard Carter ,AFP
July 20, 2012, 12:25 am TWN
BERLIN -- German MPs were to approve an aid package of up to 100 billion euros (US$122 billion) for Spain's debt-mired bank sector Thursday, despite a small rebellion in Chancellor Angela Merkel's own party.
Merkel said in the run-up to the vote that “from what I am hearing, I am optimistic” that MPs would clear the rescue package that aims to prevent the banking sector pulling recession-wracked Spain further into the abyss.
German deputies were hauled back from their summer holidays for the special parliamentary session, the 10th vote in two years on emergency eurozone action.
Thursday's vote is also urgent as Madrid hopes to sign the formal agreement for the aid with eurozone leaders a day later.
A handful of members of Merkel's governing center-right coalition were expected to vote against the package, but the aid was virtually certain to pass as the opposition Social Democrats have pledged their support.
“We always get the majority we need,” Merkel said in a weekend television interview.
Spain is hoping to get a first slice of 30 billion euros by the end of the month and has in turn agreed to a raft of banking sector reforms and EU inspectors to ensure the restructuring process is effective.
Demonstrating the urgency of the rescue, a Spanish bond auction hours before the vote resulted in higher borrowing costs and lower demand, pushing rates on the secondary market towards the seven-percent level seen as unsustainable.
The debate in Germany, which as Europe's top economy is putting up nearly 30 percent of the loans, has revolved around who is responsible for the guarantees.
EU leaders agreed at a summit last month that money from the bailout fund could be used directly to finance banks but only once a comprehensive Europe-wide oversight body, probably the European Central Bank, was in place.
However, Berlin has insisted that until then, the Spanish government is responsible for the loans — and for ensuring they are repaid.
Finance Minister Wolfgang Schaeuble, who will open the debate at 1200 GMT on behalf of the government, said the rules were “clear.”
“There is no direct access for the banks to the euro rescue shield,” he said in an interview ahead of the vote.
“There is aid, already approved by the Bundestag (lower house), to the state for the recapitalization of their banks,” added the minister.
Analysts seemed broadly relaxed about the parliamentary vote.
“We expect the Spanish program to be agreed by the Bundestag, paving the way for a formal approval ... on Friday,” said economists at French bank Credit Agricole in a research note.
Opposition from within Merkel's ranks can “to some extent be explained by domestic political considerations,” added Credit Agricole.
Economists are eyeing what could be bigger speed bump in the road towards saving the euro on Sept. 12, when Germany's top court rules on whether the eurozone's 500-billion-euro rescue fund can be passed into law.
The Constitutional Court is to hand down its judgment on a raft of challenges to the permanent European Stability Mechanism and Germany's president has withheld his signature, delaying its entry into force.
Observers expect the court to allow the ESM to pass but may insist that Germany's parliament have a greater say in future rescue action, meaning Thursday's emergency action was unlikely to be the last, analysts said.