Business World

Tuesday 25 June 2019

Call in IMF if you need help, Germany tells EU partners

Paul Carrel

Any eurozone state finding itself in financial strife should go to the International Monetary Fund rather than expect Germany to lead a European bailout, the budget spokesman for Chancellor Angela Merkel's conservatives said yesterday.

Speculation has grown over the last month that Germany and other European countries might club together to aid eurozone states like Ireland and Greece, whose finances have deteriorated sharply.

Highlighting Ireland's woes, the premium investors' demand to hold 10-year Irish government bonds rather than safer-haven eurozone benchmark German Bunds widened to a euro lifetime record of 286 basis points yesterday.

But Steffen Kampeter, who speaks for Germany's parliamentary conservatives on budget issues, said the IMF was the appropriate vehicle to finance any aid, should it be required.

"I think that's exactly why we founded the IMF," he told Reuters. "Now is not the time to look for new aid mechanisms but rather to fall back on the existing, proven stabilisation institution."

Germany's Social Democrat finance minister, Peer Steinbrueck, launched speculation about eurozone aid when he said last month bigger, economically stable nations might have to come to the help of weaker members of the currency area.

Mr Steinbrueck said in a newspaper interview yesterday that Germany could not afford to back a eurozone bond, but he appeared to leave open the possibility of Berlin helping other members of the currency area, should the need arise.

Plans

But Mr Kampeter said there was no need for Germany to work on any plans to help other eurozone states.

"I don't think there is any need at all at the moment to work on that, because there are clear, legal rules within the eurozone. I regard the no bailout clause within the eurozone as binding," he said.

The EU yesterday backed calls for a doubling of the IMF's crisis-fighting funds to $500bn.

"That doesn't mean that we are deserting anyone," he added. "But rather, this is about leaving the responsibility where it belongs, namely with the International Monetary Fund."

Also in Business