Germany having bailout fatigue

Germany’s government appears to be putting the brakes on any request by Spain for help from its European partners in managing its debts, wary that its lawmakers might balk at having to vote on yet another bailout for a struggling eurozone nation. For Chancellor Angela Merkel’s centre-right government, pushing a rescue package through parliament is always a tedious business:

BERLIN — Germany’s government appears to be putting the brakes on any request by Spain for help from its European partners in managing its debts, wary that its lawmakers might balk at having to vote on yet another bailout for a struggling eurozone nation.

For Chancellor Angela Merkel’s centre-right government, pushing a rescue package through parliament is always a tedious business:

Her parliamentary whips must work hard to bring the coalition’s increasingly reluctant lawmakers in line because failing to secure a majority of her own would be a huge embarrassment, especially one year ahead of national elections.

But even if the vote succeeds without having to rely on the opposition, the German public is increasingly tired of seemingly being on the hook for bailing out the rest of Europe.

The government thus would prefer to delay a bailout and bundle any Spanish request in with other decisions related to aid for other distressed countries from the 17-country group that uses the euro such as Greece, Portugal or Cyprus, according to lawmakers.

“If all those votes are done separately, then each of our hearing weeks will be filled with single votes on rescue measures,” said Norbert Barthle, one of the top lawmakers from Merkel’s party on the budget committee. “That wouldn’t make any sense.”

Spain has come under pressure to take up the European Central Bank on its offer to buy unlimited amounts of government bonds to help lower borrowing costs for countries struggling to manage their debts.

Such large-scale purchases of short-term government bonds would drive up their price and push down their interest rate and take some pressure off of financially stressed governments such as Spain.

To get help from the ECB, Spain must first ask for assistance from the rest of the 17 countries that use the euro by approaching the bloc’s emergency fund, the European Stability Mechanism.

Germany’s lawmakers and the constitutional court have fought hard to ensure that no German taxpayer’s money be spent or lent to other European nations without parliamentary approval, but with many decisions likely due this fall, the Parliament in Berlin could gridlock the eurozone’s attempts to solve its financial crisis.

If Spain does apply for a wider assistance program with the ESM, the Lower House of Parliament will even have to vote twice on it — once to OK the application, and then weeks or months later on the actual terms of the bailout agreement. ‘And then there are likely to be other votes on adjusting existing programs for Portugal, Greece and possibly a new application from Cyprus.

The government is therefore looking at bundling individual bailout decisions into one voting session.

“The government of course doesn’t want to have to seek parliamentary approval every other week,” confirmed Frank Schaeffler, a lawmaker from Merkel’s junior coalition partner.

“The government wants to avoid going through that debate every single time,” said Schaeffler, who opposes the bailouts.

German Finance Minister Wolfgang Schaeuble has insisted in recent weeks that Spain doesn’t need a wider assistance package because it is implementing reforms and austerity measures which will eventually help lowering its borrowing costs.

His ministry maintained on Tuesday that Berlin is not aware of Spain planning to ask for a bailout, while Foreign Minister Guido Westerwelle also praised Madrid’s reforms.

When asked whether Spain should apply for assistance, he told reporters “I’m against putting any kind of pressure on our Spanish partners.”

Officially, Rajoy denied on Tuesday that he was ready to request a bailout for the country from the ESM. There has been speculation, however, that his government is preparing for it but withholding the announcement until after important regional elections later this month.

Spain is increasingly at the centre of the eurozone crisis — its C1.4 trillion ($1.8 trillion) economy is the fourth-largest among the 17 countries that use the euro. The nation is struggling to prop up its shaky banking sector and support its heavily indebted regional governments. It has already introduced several packages of tax hikes, civil servant wage cuts and freezes in a bid to get out of the crisis.

While it still remains unclear when — or if — Spain will apply for aid, markets appeared optimistic that Madrid will make a move. The country’s borrowing costs have fallen back to more manageable levels and the IBEX stock index has risen since the ECB announced it was ready to help out Spain.

But if Germany’s domestic manoeuvring should lead to a delay, all the positive effects could be at stake, analysts warn.

“The problem here is that it’s a lot easier to lose market confidence than it is to regain it,” said foreign exchange market analyst Craig Erlam of London-based Alpari.

Germany’s opposition, meanwhile, warns that the government’s apparent idea to spare itself from holding several votes is a mirage.

“If Spain were to apply now, the vote probably would have to be held back until November. That’s a long time and probably not feasible,” said Priska Hinz, the opposition Green party’s top lawmaker on the budget committee.

She is also certain that Greece will either need “more money, more time or both,” thus requiring a new parliamentary vote, and the opposition also argues that recent changes to Portugal’s program also require a separate vote.

“I don’t know how bundling all those decisions should work, you couldn’t get all of that through parliament in a week,” she said.

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