The German government and opposition reached on Thursday a deal that will allow parliament to approve the European Stability Mechanism, ESM, next week, but Germany's top court may delay the rescue fund's start date, saying it needed time to study the treaty.
The ESM cannot come into effect without approval by Europe's biggest economy. Ratification also requires the signature of the president and a nod from the constitutional court in Karlsruhe.
The parliamentary floor leader of Merkel's conservatives appeared to dash French and southern European hopes of nudging Berlin towards common Euro area debt issuance, saying there would be no mutualisation of debt in Europe.
Italian Prime Minister Mario Monti suggested, on the sidelines of this week's G20 summit, using the Euro zone's rescue funds to buy the bonds of Spain and Italy in the secondary market to bring down their borrowing costs.
Monti hosts Spanish premier Mariano Rajoy, German Chancellor Angela Merkel and French President Francois Hollande in Rome this Friday and is also expected to raise the idea there.
Merkel has played down the proposal, which investors said might be counter-productive unless the ECB stepped in decisively in support.
A day before the four-way meeting, Italy disclosed that it is missing its target to lower the budget deficit to 1.7% of GDP and will have to cut spending by a further four billion Euros to meet the goal.
Any European bond-buying would come with strings attached, equivalent to the sort of bailout programs that Rome and Madrid are trying to avoid because of the stigma attached.
Given the limited capacity of the temporary European Financial Stability Facility, EFSF, and planned permanent ESM rescue funds, with at most 500 billion Euros available, a senior EU source said such intervention would make sense only if the ESM had a banking licence enabling it to borrow from the ECB. Germany has so far opposed that idea.
Top Comments
Disclaimer & comment rulesmiss, you can give and spend billions, but all you will achieve is wasting public money,
Jun 22nd, 2012 - 12:37 pm 0if you do not deal with the root of the problem, then covering over the cracks will not work, but just delay the enevatible,
and when it comes,
you will find that all the money you did have,,
has already been wasted,
just leave us out of it,
How can the ESM stabilise Europe without mutualisation of debt?
Jun 22nd, 2012 - 01:47 pm 0As things stand now most of the 17 Eurozombies will be in debt to Germany, France etc. until hell freezes over. Not much stability on the horizon for Greece or Spain, or anyone else to the south of Angieland as far as I can make out. Just eternal indentured servitude or the usual alternative. Interesting times :(
A perfect time for the Germans to call in all the loans,
Jun 22nd, 2012 - 09:24 pm 0Oh dear, and they can’t pay,
Oh well,
United States of Europe here we come,
Unless you wanna pay us back NOW lol.
.
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