Merkel only wants to leverage to one trillion

After two years, even the German Chancellor has understood that Greece needs a debt cut of more than 50%

Now in Berlin, too, what has been expensively delayed for two years by Chancellor Angela Merkel, Finance Minister Wolfgang Schauble and the respective economics ministers of the FDP has become reality. Berlin has always tried, seconded by Paris, to poke around at the symptoms, and this policy has cost it dearly. Nun hat Merkel vor, den bisherigen temporaren EU-Rettungsschirm (EFSF) auf eine Billion Euro aufzuhebeln. Ahead of the EU summit on Wednesday, Merkel informed the heads of the parliamentary groups and parties late on Tuesday about details according to which the "Haircut" (debt cut) should be up to 60 percent. On Wednesday, the entire Bundestag is to vote on the plan after all.

The black-yellow government in Berlin has experienced its Waterloo. Their entire ineptitude has now been revealed. Berlin’s lurching course prevented a bailout of Greece for two long years at great cost. Merkel and Schauble have hit the wall with their attempt to give the new bank bailout the appearance of a Greek bailout. Meanwhile, Greece has been ruined. It was clear that the attempt to buy time until 2013 with many billions was going to fail. If the temporary crisis mechanism then mutates into the normal state of affairs, in the "European Stability Mechanism" (ESM), even state bankruptcies with a haircut are foreseen. In the meantime, it was hoped to give the banks more time to withdraw from Greece, which German institutions, in particular, have long been doing against their former agreements.

Meanwhile, the Greeks were burdened with new debts, even though they were already unable to pay the previous interest rates. The austerity programs that were supposed to consolidate the country have printed it deep into depression and to the brink of chaos. While economic output had already contracted by 4.5% in 2010, the recession gained further momentum in 2011 and the government expects gross domestic product (GDP) to shrink by even more than 5% (Possible Greek bankruptcy causes panic). Meanwhile, Ireland’s bank bailout has crashed, Portugal has been shot down, and even euro heavyweights Spain and Italy are on the brink of collapse.

These are the results of the no-non axis between Merkel and Frenchman Nicolas Sarkozy. Since in the meantime the banking crisis 2.0 is on the agenda (it had only been glossed over with heavy subsidies), tentative steps are finally being taken in the right direction. From the Berlin "voluntary participation of private creditors" There is no longer anything to be heard about the plan to give the banks a share of about 12 percent.

How to leverage remains unclear

In the meantime, Merkel has provided some details on how she plans to save her euro bailout with Sarkozy, partially informing the parliamentary group and party leaders. After the meeting, Grunen leaders Cem ozdemir and Jurgen Trittin announced that the debt cut would be between 50 and 60%. As Schauble has already briefly suggested, the European Financial Stability Facility (EFSF) is now to be leveraged to a volume of one trillion euros. This makes it clear that Berlin is aiming for the insurance lottery. The trillion results from the money still available in the EFSF fund, because part of the 440 billion euros has already been used for the emergency aid of Ireland and Portugal. With a planned hedging of 20-30%, only one trillion can be leveraged.

As further details it became known that the banks need a higher capitalization. For this they are to be recapitalized in whole Europe over tax money with 100 billion euro. The core capital ratio is now to rise to 9%. This is significantly higher than the so-called "Financial market regulation" only a year ago with "Basel III" agreed quotas. But even this is not sufficient. You only have to look at Switzerland, where 10% is required. But one could also take an example in the EU. If weak credit institutions are wound up in Denmark, one demands even 16% there.

The fact that only one trillion can be leveraged is because Merkel has prevailed in the dispute with Sarkozy. He wanted to enable the EFSF to refinance more sensibly and more cheaply through the European Central Bank (ECB). But Merkel has created the next problem: One trillion will by no means be enough if Berlusconi’s chaotic Italy crashes. The trillion is not enough even if Spain is not dragged down with it (which is likely).

Because the situation is now dramatic, all etiquette was partly thrown overboard at the Palaver summit in Brussels on Sunday. Berlusconi was also severely criticized. Definitive measures are now being demanded of him. He was supposed to push through in three days against his coalition partners and the opposition what he did not or did not want to achieve in months. The Lega Nord, for example, is strictly opposed to raising the retirement age to 67 for electoral reasons. Umberto Bossi, meanwhile, has once again declared that the government in Italy is in danger, after a special meeting of the cabinet failed last night without result.

Merkel, on the other hand, has also fallen over herself in wanting to leverage the Bundestag on the new decision. Still on Tuesday, their government spokesman Steffen Seibert had said: "The goal is to provide the budget committee with enough concrete documentation in time to make a decision." Merkel was planning to have one of the various leverage variants nodded off only in the budget committee. But now the entire Bundestag is to vote on Wednesday on the changes to the euro bailout fund. This is what Volker Kauder (CDU) had demanded. The head of the CDU/CSU parliamentary group referred to the public debate over the past few days, which is why "have taken on a fundamental importance" have. He really means the internal dispute. Although this time the FDP is not pushing crosswise, because FDP leader Rosler has ared the Chancellor’s approval.

But there are the dissenters in the CDU/CSU and they have already announced their "no". How the Social Democratic and Green opposition will behave is also unclear. Because in the meantime they feel that they have been exchanged by the government and have not made a commitment. They lack concrete specifications for this. "We are still not in a position to talk about specific texts", explained Frank-Walter Steinmeier, head of the SPD parliamentary group, who therefore felt unable to commit himself. It is still unclear how leverage is to be applied.

Steinmeier demands that Germany’s current liability volume must not be expanded beyond the 211 billion euros that have been agreed upon. Why he wants clarification about the increased risk of default, however, remains his secret. Because that rises in all cases. The hard-hit chancellor will try to get a majority for her plans in a government statement tomorrow at noon. With her approval, she will then travel to Brussels in the evening. There, Merkel’s plan is to be finalized with the heads of state and government of the euro zone. It cannot be ruled out that Merkel will now stumble over the obstacle she has put in her own way, either in Berlin or in Brussels. One can be curious.

This morning, Merkel’s government spokesman had amed that the budget committee alone would deal with the amended guidelines. He stressed that Germany’s liability limit of 211 billion euros would not be affected by the new EFSF rules "Not touched" will.