Home > Economy > APPROVED! Spain Bailout Approved By German Parliament

APPROVED! Spain Bailout Approved By German Parliament

— Photo Courtesy of Bloomberg.com —

It was an easy win for  Chancellor Angela Merkel.

Germany’s Lower-house lawmakers on summer break were called back  and returned to Berlin  on a rainy one day session to vote on Spain’s Bailout which was approved 473 to 97.  The special session was to vote on recapitalizing Spain’s banks with 100 billion euros ($123 Billion). Germany, Europe’s largest economy, will guarantee almost 30 percent of the new euro zone aid package.

Merkel received help  from Finance Minister Wolfgang Schaeuble who appealed to the lawmakers to aid Madrid who said the slightest perceived risk of Spanish insolvency could trip up the entire 17-nation euro zone.

“Any problems in the Spanish banking sector are a problem for the financial stability of the euro zone,” he said.  In order to be able to commit Germany to the Spanish bailout in a conference call of euro zone finance ministers, Schaeuble needed the parliamentary approval.

Merkel must work within the  limits set by government’s  parliament, the Constitutional Court as well as heed to German public opinion while under intense pressure from the European Union partners to act in a timely manner  to diffuse the crisis.

“Spain is the fourth biggest economy in the euro zone and a couple of its banks need to be stabilised. If we don’t do it, the country that suffers most is Germany, so it is in Germany’s interests to help Spain,” Andrea Nahles, deputy party leader for the main opposition Social Democrats (SPD), told Reuters.

The rescue opposition, Social Democrats, are agreeing if the rescue and liability lies with Spain directly and not through just the Spanish Bank.   They do not support the direct recapitalization of the Spanish banks which the new ESM could resolve if  and when it  meets constitutional requirements.

“If the majority of us still vote in favour, this is only because in our view too the damage would be catastrophic if Germany denied aid to Spain,” Frank-Walter Steinmeier, parliamentary floor leader of the SPD, said ahead of the vote.

The court has delayed the entry into force of the ESM, the permanent rescue fund, pending a detailed legal review of whether it violates the German constitution. The court is due to deliver its verdict only on September 12.

Additional Reading:

Spanish Financial Crisis: Eurobonds? No Thanks. Debt Isn’t Solved With More Debt

The European Union: How Does it Work? (New European Union)

SPAIN REPORT: ” Spanish bailout. This is the beginning of a European revolution”.

European Union Lawcards 2011-2012

 

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