German coalition under fire for talks ahead of crucial vote

German Chancellor Angela Merkel and Vice Chancellor and Economy Minister Philipp Roesler on September 29, 2011 in Berlin, Germany.

Story highlights

  • German lawmakers are to vote on expanding the powers of Europe's bailout fund
  • Expansion of the fund is seen as a crucial step toward stemming the debt crisis
  • Germany's vote is key because it is the eurozone' s biggest economy
Germany's ruling coalition yesterday conceded that it was involved in talks about increasing the firepower of the eurozone's €440bn rescue fund, even before Thursday's crucial parliamentary vote on changes agreed by governments in July.
Senior politicians sought to reassure their restive Bundestag colleagues that any "leveraging" of the bail-out fund would require neither extra taxpayers' contributions nor printing money by the European Central Bank.
Norbert Barthle, a budget policy expert in chancellor Angela Merkel's Christian Democratic Union, said discussions were centring on whether the European financial stability facility "could give so-called guarantees" to insure buyers of sovereign bonds for part of any potential losses.
His counterpart from the Free Democrat junior coalition partner, Otto Fricke, defended the government's right to do so because models currently on the table would "not increase the liability of German tax payers" beyond the €211bn ($287bn) on which the Bundestag is due to vote on Thursday.
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Their words came in reaction to accusations from the opposition Social Democrats and Greens that the government was denying talks in an attempt to trick parliament into approving the EFSF revisions.
"In order to secure a coalition majority in the Bundestag, finance minister Wolfgang Schäuble is deliberately keeping parliament in the dark about further steps being discussed," Carsten Schneider, a senior Social Democrat and budget-policy expert, said.
Germany's finance minister ignored a call from the Social Democrats to explain the government's "gross disregard for parliament" to the powerful budget committee. Lawmakers said he acknowledged new talks about the EFSF, but declined to go into detail.
Despite the opposition onslaught -- and plenty of behind-closed-doors grumbling in its own ranks -- the ruling coalition was quietly confident of winning enough votes from Christian Democrats and Free Democrats to get the bill through parliament without help from the opposition.
Senior lawmakers told the FT they expected votes against and abstentions to total "around 14", in their view comfortably short of the 19 no-votes that would threaten the government's own majority.
Lawmakers are expected to vote around lunchtime about increasing German guarantees for the EFSF from €123bn and giving it new tools, such as buying sovereign bonds on the open market and the power to recapitalise EU banks.
Despite their complaints about the government's failure to keep the Bundestag in the loop, Social Democrats and Greens were still pledged to backing the revisions, making a large majority very likely.
Christian Democrat and Free Democrat parliamentarians told the FT that Mr Schäuble had been able to contain irritation about new EFSF talks by using meetings on Tuesday to pledge that the rescue fund would not be leveraged using central bank money.
He also dismissed as a "stupid idea" any notion of again expanding government guarantees for the EFSF, warning this would damage Germany's triple A sovereign credit-rating. Lawmakers said Germany and its partners were looking at perhaps five or six guarantee models for the EFSF.