quarta-feira, 28 de setembro de 2011
Germany and the euro
WHAT is at stake in tomorrow’s vote in the Bundestag, Germany's lower house, on the European Financial Stability Facility (EFSF), a bail-out mechanism for the euro? A lot, and a little. The bill to expand the powers of the EFSF is almost certain to pass with an impressive majority, since the main opposition parties, the Social Democratic Party (SPD) and the Greens, have promised to support it. So the euro-rescue effort is likely to survive this test.
A bigger question is how much support Angela Merkel, Germany's chancellor, will receive from her governing coalition, which consists of her Christian Democratic Union (CDU), its Bavarian sister party, the Christian Social Union (CSU), and the Free Democratic Party (FDP). This matters. If Mrs Merkel is forced to rely on opposition votes to enact the most important law of her chancellery she will be weakened.
In 2001 her predecessor as chancellor, Gerhard Schröder, could not construct a majority with votes from his SPD-Green coalition alone for sending troops to Macedonia. If a government needs opposition votes to pass laws, declared Mrs Merkel, then (as now) chair of the CDU, “not only its ability to act suffers but so does Germany’s reputation abroad.” That statement will be flung back at her if her “Christian-liberal” coalition does not itself provide enough votes to pass the EFSF bill. Securing German approval for further euro-bolstering measures will become harder.
There is some dispute about exactly what sort of majority Mrs Merkel needs to avoid humiliation. Horst Seehofer, the boss of the CSU, who cares more about his standing in Bavaria than about the health of the coalition, has mischievously suggested that Mrs Merkel needs a “chancellor's majority”—an absolute majority of the 620-member Bundestag composed of coalition votes alone.
But Mrs Merkel would probably be content with an “own majority”, meaning that pro-EFSF votes from the coalition exceed the number of opposition MPs present and voting. In any case, Mrs Merkel has made it clear that she has no intention of linking the EFSF to a vote of confidence. She intends to soldier on regardless.
She has grounds for cautious optimism. In a test vote of CDU and CSU deputies yesterday, 11 opposed expanding the EFSF and two abstained (another dissident did not show up). The FDP’s parliamentary head, Rainer Brüderle, has said he expects no more than four defectors from his party. If that result is repeated tomorrow, the coalition’s 19-vote edge will be whittled down to down to a majority of one: a bare chancellor's majority.
None of this will end the government’s agonies, let alone those of the euro. The Bundestag will have to weigh in again, on further bail-outs for Greece (assuming it does not default) and on the European Stability Mechanism (ESM), a permanent successor to the EFSF. The FDP will probably hold a referendum among its members on whether the party should endorse the ESM.
But the bigger worry is that even these measures, which will stretch Germany to the limits of its tolerance, may not be enough to save the single currency. The Bundestag was unsettled this week by rumours that finance ministers meeting in Washington were cooking up plans to expand the €440 billion ($600 billion) EFSF still further. The fund has enough firepower to deal with the likes of Greece, Portugal and Ireland, but not with a troubled giant like Italy.
The idea that emerged in some reports over the weekend was to leverage the resources of the EFSF, possibly by giving it a banking licence, allowing it to borrow from the European Central Bank.
This may be where Germany draws the line. Leveraging the EFSF would raise the risk to the countries that underwrite it. Standard & Poor’s, a ratings agency, has warned that such steps could lead to a downgrade of Germany’s credit rating, a chilling prospect for a country where an AAA rating is considered almost as important as the right to vote.
“The coalition majority would be in danger" if the EFSF were leveraged, said Hermann Otto Solms, a leading FDP deputy. Jens Weidmann, the president of the Bundesbank, rejected the banking-licence idea.
The government is downplaying speculation that the EFSF will be further reinforced, although the finance minister, Wolfgang Schäuble, says that its resources must be used “efficiently”. But a successful EFSF vote tomorrow will not answer the central question: is Germany’s best offer to its partners in the euro zone good enough to keep it from falling apart?
by The Economist