Friday 24 May 2019

Merkel tells her critics bailout countries 'deserve solidarity'

German Chancellor Angela Merkel drinks beer in a beer tent during a fair in Abensberg, southern Germany, yesterday
German Chancellor Angela Merkel drinks beer in a beer tent during a fair in Abensberg, southern Germany, yesterday
German Chancellor Angela Merkel gives a speech in a beer tent at the traditional folk festival 'Gillamoos' in Abensberg, southern Germany, September 3, 2012.

Tony Czuczka and Patrick Donahue

GERMAN Chancellor Angela Merkel has told her domestic critics that bailouts are here to stay, while her finance minister warned against placing too much faith in the European Central Bank's ability to stop the crisis.

Chancellor Merkel yesterday made a foray away from crisis-fighting as she travelled to a traditional political gathering in a packed beer tent in southern Germany to confront anti-bailout critics in her government coalition. Countries such as Greece "deserve our solidarity" as long as they meet commitments for overhauling their economies, she said.

"We need Europe, but we need a strong Europe," she told members of her Bavarian Christian Social Union sister party in the town of Abensberg, northeast of Munich. "We can't take up so much debt that tomorrow we won't have anything left and we'll be at the mercy of the financial markets."

The appearance at a Bavarian political meeting offered a glimpse of how euro-crisis politics will steer public discourse as Germany heads into an election year. With markets awaiting details this week of a bond-buying plan from the ECB, Finance Minister Wolfgang Schaeuble said that Europe shouldn't raise "false expectations" over the central bank's ability to stem the turmoil, leaning on indebted nations such as Italy and Spain.

Mrs Merkel also maintained pressure on Greece, saying the country must fulfil the terms of its bailouts in return for "solidarity," while austerity programmes undertaken in Spain and Portugal "require an effort."

Tension

"We have to press for reforms in other countries even if they sometimes say we're hardline," she said. "It's not enough just to keep muddling through. But I also say that in such a difficult phase, these countries deserve our solidarity and that we root for them to overcome their difficulties."

Almost three years after the crisis emerged in Greece, investors seeking an easing of the market tension are looking to ECB President Mario Draghi's Thursday press conference to give more details of his proposals to help lower borrowing government costs.

Mr Draghi said on August 2 that bond purchasing will take place in tandem with the euro's rescue funds and require strict conditions from governments.

Mr Draghi defended the bond buying proposal yesterday and, in closed-door remarks to deputies in Brussels, said he was comfortable with the bank purchasing debt of as much as three years, according to Jean-Paul Gauzes, a member of the European Parliament who attended the sessions.

Such purchases are within the powers of the ECB, he told lawmakers.

Any plan must fall within the mandate of the ECB, Mr Schaeuble said in a radio interview, adding that Germany would not accept ECB financing of state budgets.

"We have to be very careful that we don't raise false expectations," Mr Schaeuble said.

"It has to remain very clear, state debt can't be financed through monetary policy. Therefore we can't have a decision -- we would think it very wrong -- that's not covered by the ECB mandate."

Mr Schaeuble, due to meet with Greek Finance Minister Yannis Stournaras in the German capital today, said he was confident a ruling by Germany's Federal Constitutional Court next week would not derail the euro-area's permanent rescue fund, the European Stability Mechanism. Only with its endorsement can the legislation be approved and the €500bn ESM go into operation.

"I can't see any problem in our German constitution" with the ESM, he told students at an event in Strasbourg. "I am sure that will not happen." (Bloomberg)

Irish Independent

Also in Business