The German government is set to resist or delay increasing the size of the eurozone's financial "firewall" against contagion from the Greek debt crisis, in the face of mounting pressure from its partners, the International Monetary Fund and the US administration.
Steffen Seibert, spokesman for Angela Merkel, the German chancellor, insisted that Berlin saw no need to increase the size of the permanent €500 billion European Stability Mechanism. “The German government’s position has not changed”, he said. “That means no, it is not necessary.”
Ms Merkel and her finance minister, Wolfgang Schäuble, are looking isolated in the face of strong pressure from Christine Lagarde, managing director of the IMF, and the other 16 members of the European monetary union. Ms Merkel fears a backlash within her own centre-right coalition, and from public opinion, if she has to argue for any increase in Germany’s financial guarantees to eurozone rescue funds. She faces a tough vote next week in the Bundestag, the national parliament, over the €130 billion Greek rescue programme.
The Dutch government, which like Germany has taken a hard line on committing resources to the Greek crisis, however indicated it had switched positions. Jan Kees De Jager, finance minister, argued in favour of a higher firewall by combining the resources of the ESM with the current temporary European Financial Stability Facility.
The EFSF has an additional €250 billion left after programmes to help Greece, Ireland and Portugal. Germany has so far insisted that this cannot be added to the ESM funds.
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