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Thursday 18 January 2018

Germany agrees deal to approve ESM permanent bailout scheme

Wolfgang Bosbach, a senior MP in Angela Merke's conservative Christian Democratic Party, said that Germany would not
Wolfgang Bosbach, a senior MP in Angela Merke's conservative Christian Democratic Party, said that Germany would not "honour" the scrapping of agreements Greece had reached with its EU partners

Andreas Rinke and Thorsten Severin

THE German government reached a deal with the opposition on Thursday on economic growth measures for Europe that will allow parliament to approve the euro zone's permanent bailout scheme and a pact on budget discipline next week.

The parliamentary leader of Chancellor Angela Merkel's conservatives, Volker Kauder, said eight weeks of tough talks had produced a deal, which was "a good sign for Europe". But he reiterated Berlin's stance that there would be no mutualisation of European debt.

"We all want to stabilise the euro," said Kauder, hailing German politicians for putting aside their own party interests.

The centre-left opposition had demanded growth and job-creation measures to attenuate the economic and social impact of Merkel's drive for austerity in her "fiscal compact", which has been agreed by 25 of the 27 members of the European Union.

The Social Democrats (SPD) and Greens made this a condition for their approval in parliament of both the fiscal pact and the European Stability Mechanism (ESM), the new bailout fund that cannot come into effect on July 1 without being ratified by Germany, the biggest economy in the euro zone.

Merkel needs their support in the June 29 vote because approval of such laws needs a two-third majority in parliament.

The centre left has backed the chancellor on all emergency measures so far in the sovereign debt crisis, but has begun to crank up its opposition rhetoric ahead of federal elections in 2013, when Merkel is expected to seek a third term.

But the government rejected proposals from the centre-left - egged on by new French Socialist President Francois Hollande's victory - for the 17 euro zone states to issue debt jointly.

Merkel argues that "euro bonds" or other similar instruments would merely remove the incentive for underperforming euro zone member states to reduce their debts and deficits.

"There will be no mutualisation of debt. Debt redemption funds are not allowed either by the constitution or by European treaties, and that's why we didn't agree to implement them," Kauder told reporters.

The SPD said they had agreed with the government to push for a financial transaction tax in the European Union, if necessary starting with a smaller number of willing states.

"We agreed we will aim to tax financial markets according to the EU Commission's model of a financial market transaction tax, and we agreed that if this is not possible with all 27 EU states, then we will form a 'coalition of the willing' of at least nine states," said SPD parliamentary leader Frank-Walter Steinmeier.

A document containing the terms of the agreement, a copy of which was obtained by Reuters, showed that the government and opposition wanted to tax all financial transactions if possible, and have European legislation ready this year for consideration by lawmakers in individual member states taking part.

The agreement states that the tax needs the participation of at least nine member states, would be based on a model proposed by the European Commission and should in particular target stocks, bonds, currencies, derivatives and investments.

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