German lawmakers backed a euro-area bailout of Spanish banks after Finance Minister Wolfgang Schaeuble gave assurances that Spain will remain liable for the aid and parliament will be consulted on each step of the rescue.
Lower-house lawmakers were forced to interrupt their summer break as they were recalled to Berlin for a special session on bank recapitalizations for Spain of as much as 100 billion euros ($123 billion). They voted 473 to 97 in favor of the bill after the main opposition parties were persuaded to back Chancellor Angela Merkel’s government and most coalition dissent quelled.
Spain faces “an emergency situation” and Germany has “a strong interest” to support the country’s economic overhaul by helping shore up Spanish banks, Schaeuble told lawmakers today as he opened the debate. “Spain is making the application, Spain is getting the money for bank recapitalization and the Spanish state must guarantee the funds.”
Spain has moved center-stage in the debt crisis now in its third year. Lawmakers in Berlin were reminded of the challenges Prime Minister Mariano Rajoy’s government faces as borrowing costs surged at an auction of five-year notes, pushing Spain’s 10-year benchmark bond yields past the 7 percent threshold that prompted sovereign bailouts in Greece, Ireland and Portugal. Germany pays about 1.23 percent to borrow for 10 years.
“There’s doubt in the markets that the Spanish state can solve the problems in its banking sector without putting its own solvency at risk,” Schaeuble said. “That makes the problems in the Spanish banking sector a problem of the euro zone’s financial stability.”
While there was broad support to help Spain within Merkel’s coalition and the main opposition Social Democrats and Greens, lawmakers demanded reassurances that German taxpayer money will be channeled via the Spanish government and not go directly to banks themselves. They raised concerns that loopholes may enable such a route when the program shifts from the current rescue fund to the permanent European Stability Mechanism.
“Schaeuble reassured us today that there will be no possibility to sidestep the liability issue in the process of transferring Spanish bank rescue aid,” Michael Fuchs, deputy parliamentary leader of Merkel’s Christian Democratic Union party, said in an interview in Berlin. “We want to make sure there are no tricks,” that there is no “circumventing state liability,” he said. “The German parliament will be involved all the way.”
Merkel’s coalition controls 330 of the 620 seats in the lower house of parliament, the Bundestag. She needed 311 of those votes for the so-called chancellor’s majority that she failed to secure twice this year, when parliament backed the second aid program for Greece and when it approved the ESM. Both measures passed with support from the opposition. A breakdown of the vote will be published later today.
A test vote among Merkel’s Christian Democrats and their Bavarian sister party, the Christian Social Union, yielded 12 dissenters, Volker Kauder, the bloc’s floor leader, told reporters. Another four members of Merkel’s Free Democratic coalition partner had indicated they would oppose the bill.
For all the speculation over the Spanish vote, Merkel saw her approval rating for managing the crisis in general rise to 63 percent from 60 percent two months ago, ZDF public television said July 13, citing a poll it commissioned from FG Wahlen. Merkel hinted the same day that she will seek a third term at national elections due in the fall of 2013, saying that the euro crisis will be a dominant theme.
Her CDU/CSU bloc leads the Social Democrats by 36 percent to 26 percent, a weekly Forsa poll for Stern magazine showed yesterday. That compares with the 33.8 percent her bloc won at the last election in 2009, when the SPD took 23 percent. Even so, neither her alliance with the Free Democrats nor the SPD and Greens would win enough votes for a majority if elections were held now, the poll showed.
Schaeuble briefed members of the all-party Budget Committee on Spain late yesterday, giving him an opportunity to reiterate his stance that there will be no direct help for banks from the ESM without changes to its rules and to German law.
Parliament will in the meantime have a right to veto any rule changes to the temporary rescue fund that would allow direct bank aid, said Hans Michelbach, a senior CSU lawmaker. That means parliament will have to vote again on the details at the time of the changeover to the permanent fund, he said.
“Critics say these are the first steps toward a mutualization of European bank rescues,” Michelbach told reporters before the vote. “I don’t see it that way.”
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