Angela Merkel, chancellor of Germany, finds herself in a tight spot. She was put there by her own government as members of parliament in the ruling coalition on Wednesday passed a nonbinding resolution opposing the repurchase of debt by the European Stabilization Mechanism (ESM) when that vehicle replaces the existing euro zone bailout fund in 2013.
Reuters has reported that Merkel has not been hesitant about voicing opposition to changes in the current European Financial Stability Facility (EFSF) to boost its rescue power. However, this document exerts fresh pressure on her to avoid committing Germany to helping to underwrite the debt of the euro zone’s peripheral nations—this despite the hope of markets for those nations’ debt that Germany would agree to a comprehensive crisis plan.
A weekend election in Hamburg delivered Merkel’s party a stunning defeat, the worst since World War II, and now she may be forced, in a bid to avoid further trouncing—seven German states have elections scheduled for 2011—to abide by the document’s terms despite its nonbinding nature. She will need the support of the election winners to implement future reforms.
The resolution, voted on by her Christian Democrats (CDU), the Christian Social Union (CSU) and Free Democrats (FDP), recommended that buybacks of government debt by the ESM be eliminated. The motion, which demands that Germany’s government not agree to measures that might lead to a "transfer union,” will be put to a vote in parliament’s lower house this week.