19 July 2012

WSJ: German lawmakers back aid for Spain

German lawmakers resoundingly backed the latest European rescue, a package of loans from the eurozone bailout fund to prop up weakened Spanish banks, handing Chancellor Angela Merkel a victory as doubts about the euro rise in Germany.

Despite growing public opposition to eurozone bailouts, parliament voted 473 to 97—from a total of 583 valid votes—to approve awarding up to €100 billion in loans from the European Financial Stability Facility, the eurozone's temporary bailout facility, to allow Spain to refinance its banks. Lawmakers from Ms Merkel's own coalition carried the vote with a clear majority of 301 votes, meaning that Ms Merkel didn't need the votes of the opposition to pass the rescue package. The ranks of the euro rebels also thinned, with just 22 coalition lawmakers voting against the Spain rescue plan, down from 26 coalition no votes against ratifying the European Stability Mechanism, the eurozone's permanent bailout fund, on June 29.

At the start of the debate, Finance Minister Wolfgang Schäuble appealed to lawmakers to approve the bailout package, saying that Europe needed to buy time for Spain to repair its economy and restructure its banking system. He said the aid was conditional on an agreement by Madrid to restructure its banks and accept liability for repayment of the loans. The German finance minister said Spain was making progress reforming its economy, but that insecurity on financial markets had created an extraordinary situation and required Europe to act.

"We are helping Spain in this extraordinary situation to deal with the exaggerated nervousness on financial markets, and by doing so we are making a contribution towards financial stability in the eurozone as a whole", Mr Schäuble said.

He rejected criticism that Spain was receiving a blank cheque from Europe that would set a dangerous precedent, encouraging other countries to seek bank bailout loans from the EFSF and the European Stability Mechanism, the permanent bailout fund that is expected to begin operating this year.

Euro rebels within Ms Merkel's coalition of Christian Democrats, the Christian Social Union of Bavaria, and the pro-business Free Democrats, warned that the Spanish aid was putting Europe on a slippery slope that could end with German taxpayers providing cash to prop up uncompetitive banks in southern Europe. Frank Schäffler, an FDP backbencher who has become the most prominent of the bailout critics, said the Spanish bank bailout failed to make the bank's owners pay.

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