Germany unveils bills for euro fund

Germany introduced draft legislation yesterday that would allow it to contribute to Europe’s latest efforts to deal with the region’s debt crisis. Finance Minister Wolfgang Schaeuble, presenting the bills in parliament, attacked critics of the plan as “professional scarers” who had unsettled financial markets. The package of legislation follows the agreement among European nations to create the European Stability Mechanism (ESM), a permanent rescue fund worth 500 million euros ($667 billion). In the addition, the legislation seeks to implement the so-called fiscal compact treaty to enforce budget discipline. The leaders of 25 of the 27 European Union members, including Germany, have agreed to the pact. Schaeuble said the bills, which have the support of all major political parties, were a “further building block towards overcoming the crisis of confidence” in the 17-member euro zone. With Chancellor Angela Merkel listening from the front bench, Schaeuble assailed critics of the second euro zone bailout for Greece that was agreed this month. “There were many lobbyists from the finance sector who said this was dangerous and this rescheduling would not work,” he said referring to critics of Europe’s moves to throw Athens a financial lifeline to head off bankruptcy. “It did work... The professional lobbyists and scarers are not always right. We made the right decisions.” Schaeuble confirmed that he would be proposing to fellow euro finance ministers at a meeting today in the Danish capital Copenhagen that ESM cover and past aid from the current temporary fund, the European Financial Stability Facility (EFSF) should run in parallel for sometime. The government’s plan for the ESM was also agreed to this week by the leaders of Germany’s main political parties. Germany has been under pressure from leading international organisations and its partners in the 17-member euro zone to substantially expand the euro rescue mechanism to head of the threat of the debt crisis engulfing other euro states, such as Spain and Italy. The Paris-based OECD this week proposed that the so-called firewall for the euro zone should be bolstered to 1 trillion euros. But said Schaeuble: “We propose that the 500 billion lending volume of the ESM should not be reduced by subtracting from it the aid payments for Ireland, Portugal and Greece under the previous programme, but rather that we should have this as additional aid volume on top,” Berlin’s concession on the issue means that the safety net will have a volume of up to 700 billion euros for a limited period.