German Deputy Finance Minister Steffen Kampeter said he doesn’t expect the nation’s Constitutional Court to stand in the way of Europe’s permanent bailout fund and that it can come into effect in coming days.
“I’m expecting it within the next week,” Kampeter said in an interview with Maryam Nemazee on Bloomberg Television’s “The Pulse” in London today, when asked about Germany clearing the way for the rescue fund. “I don’t expect anything on the baseline to change. Not doing anything is a much riskier threat” for Germany and Europe.
A legal challenge to the European Stability Mechanism has prevented German President Joachim Gauck from signing off on the bailout fund, a key weapon in European governments’ push to end the debt crisis. While it was passed by the country’s parliament last month, final approval hinges on the Constitutional Court, which will decide as soon as tomorrow whether to grant a temporary injunction against the legislation.
The court will tomorrow hear challenges from politicians and private citizens and may then say then how long it will take for it to rule.
Delaying approval of the fund risks depriving Europe of a strengthened bond-buying instrument, which Spain and Italy have touted as a tool to reduce surging borrowing costs. European leaders also agreed at a summit in Brussels on June 29 that the fund can be used to directly capitalize banks.
The permanent fund is nevertheless dependent on more than just Germany to come into force. Italy’s parliament isn’t scheduled to vote on the approval necessary for ESM to become active until July 30. For the ESM to take effect, countries representing 90 percent of the voting weight of the 17 euro- region nations must give their approval. Italy has a voting weight of almost 18 percent.
Kampeter said that proposals to give the ESM a banking license, allowing it to borrow from the European Central Bank, “doesn’t solve the problem” and historically, “when central banks tried to solve political problems by printing money,” it led to persistent inflation.
He also said countries need to focus on improving their economies rather than pressuring the ECB to buy government bonds to cap rising borrowing costs.
Spain’s 10-year debt yield rose above 7 percent today as Europe’s finance ministers gather to work out crisis measures after leaders agreed last month to ease access to direct financing for banks as well as a more unified banking system.
Kampeter said that rising borrowing costs reflect the “trust in the reform capabilities of national politics” and “to keep your spreads low, you have to reform your country.”
The European Commission will make proposals “as soon as possible” for a single euro-area bank supervisor, though there is “no concrete timing” yet, spokesman Olivier Bailly told reporters in Brussels today.
Kampeter said he does not see a supervisor “earlier than 2013” as “the common understanding of the summit was that one single rulebook and a common understanding of a supervisory banking authority in Europe has to be discussed.”
He rejected pressure to fast-track a joint deposit insurance scheme for the euro area as “first is supervision and then we’ll have to see if other steps can follow,” he said. “Some seem to think that the solidarity issue in the banking union should start first; I don’t think that.”
Kampeter said that it would be difficult to explain to taxpayers that “we should invest in lack of supervision in other countries.”
To contact the reporters on this story: Tony Czuczka in Berlin at firstname.lastname@example.org; Maryam Nemazee in London at email@example.com
To contact the editor responsible for this story: James Hertling at firstname.lastname@example.org