Reuters: Germany pushes to limit eurozone aid to banks

12 February 2013

Germany's Finance Minister Wolfgang Schäuble said the eurozone's bailout fund should limit any recapitalisation of banks to well below €80 billion, if anything at all.

Schäuble's ambition of curbing the use of the €500-billion European Stability Mechanism presents an obstacle to countries such as Ireland, which still hopes to get direct assistance from the fund for their banks. "It's clear it must be significantly below the €80 billion paid in capital", Schäuble said. "Somewhere between nil and 80 billion euros."

Eurozone leaders agreed last June to allow the ESM to directly recapitalise banks to stop the rescue of failed banks from piling debt on individual countries. But Germany and others have deep reservations about using the fund for this purpose because they fear it will leave them on the hook for bad loans made in Spain and elsewhere. In June, it had also been hoped that this direct aid promise could help Spain, where banks had been hit by a property collapse. Financial markets have since calmed, however, following a pledge by the European Central Bank to intervene, removing the urgency to act.

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