02 April 2012

Spiegel: Bundestag's rights could threaten euro rescue

The German parliament has secured far-reaching rights to decide on the actions of the euro rescue fund. But several German politicians are warning that the Bundestag's determination to have its say could threaten efforts to save the euro, by hindering the fund's ability to act quickly.

German Finance Minister Wolfgang Schäuble ultimately had to concede defeat. Last Friday, Schäuble, a member of Chancellor Angela Merkel's conservative Christian Democratic Union (CDU), voted in favour of the massive eurozone bailout packages whose sheer size makes most people's heads spin. "The euro area is mobilising an overall firewall of approximately €800 billion, more than $1 trillion", the Eurogroup, which consists of the eurozone finance ministers, proudly announced.

This time the problem won't be the German government but rather the German parliament, the Bundestag. Since the Bundestag insists on having a say on every minute detail involving the rescue fund, it's making life more difficult for the would-be euro rescuers. A number of instruments that the eurozone governments only agreed to after fierce wrangling will thus probably remain permanently toothless, and will possibly never be implemented.

Until now, the Bundestag has enjoyed co-determination rights that exceed virtually every other national parliament in Europe. Representatives of all political parties decided last week that these rights should now be extended. In the future, the Bundestag will have to give its approval to nearly all measures taken within the scope of the temporary eurozone rescue fund, the European Financial Stability Facility (EFSF).

That is, of course, how things should work in a properly functioning democracy. But the situation also requires viable procedures and effective decision-making bodies -- and this is precisely where the problem lies. Veteran parliamentarians have warned that the new rules will be extremely difficult to implement, and the ECB too is alarmed. Central bank representatives have informed the German government that the reform threatens the effectiveness of the bailout packages and shifts the onus right back to the body that was actually supposed to be relieved of this burden: the ECB's governing council.

Indeed, the parliamentarians had originally organised the monitoring of the new fund largely in line with the monetary watchdog's needs. Regardless of whether the temporary rescue fund was to aid debt-stricken countries by purchasing sovereign bonds directly from governments on the so-called primary market, or on the stock exchanges (the secondary market), the decisions were to be largely monitored by a secret committee elected by the parliamentarians. That, at least, was what the Bundestag decided last September. The parliamentarians hoped that this would prevent the euro rescuers' plans from being prematurely disclosed and effectively nullified by speculators on the financial markets.

Full article

© Spiegel Online