German Cabinet Approves Bigger Rescue Fund

Severity of debt crisis muffles dissent among members

The members of German Chancellor Angela Merkel’s Cabinet gritted their teeth and passed a measure on Wednesday that would provide for a larger rescue fund in response to the euro zone debt crisis. Earlier arguments against the measure protested the level of participation by taxpayers in funding the bailout vehicle, but the level of the crisis was high enough to get the measure through the cabinet vote. It still must be ratified by a broader vote Sept. 29.

Bloomberg reported that the provision, which was approved by European leaders at a July 21 summit meeting, is a reconfigured European Financial Stability Facility (EFSF) that includes sovereign bond-buying powers and raises Germany’s share of EFSF loan guarantees to 211 billion euros ($305 billion) from its previous level of 123 billion euros.

While Finance Minister Wolfgang Schaueble commented in the report that with the measure’s passage “the German government has strengthened its determination to secure the stability of the euro with a powerful set of tools at the Euro zone level,” opposition still runs high. Some lawmakers have said they will vote against the measure in that late-September vote, and there is opposition within Merkel’s own party, the Christian Democrats (CDU).

Wolfgang Bosbach, the CDU chairman of Parliament’s interior affairs committee, was quoted saying in a television interview, “This is a fundamental question for our children and grandchildren, whom we’re already saddling with mountains of debt—and then we’re adding huge risks on top of that.” He continued, “I’m not against helping Greece. I just doubt that ever-higher debts can actually help.”

Lack of support within Merkel’s party could be the measure’s undoing. Coalition members have said they will support it in the final vote, but dissent within her own party could threaten the coalition. Also at stake are regional elections; voters have already punished officials who supported public-financed bailouts of troubled euro zone countries, and the opposition Social Democrats are thought by pollsters to be primed to win both an election in Merkel’s home state and another in Berlin.

Yet another factor is the threat of what might occur if the measure does not pass and bailouts do not continue. Many lawmakers are more concerned about that.

Manfred Guellner, the head of polling company Forsa, was quoted saying, “Few in the ruling coalition want to risk being sent into the political wilderness if rejecting this bill means new federal elections. In a crisis that is so complex, where so much is at stake and where no one has a simple solution, it makes sense to seek consensus. That’s why we hear supportive noises from the main opposition parties and why a coalition majority is likely.”

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