Germany Rejects Bigger Bailout

Wall Street Journal
January 23, 2012

Germany rejected calls for boosting the size of the planned euro-zone bailout fund, even as talks on restructuring Greek debt stalled over the weekend and raised the specter of a possible Greek default.

European demands to ensure that the European Stability Mechanism, the permanent bailout fund that is expected to be launched in July, has sufficient firepower to stop the spread of financial contagion in the event of a Greek default is likely to dominate a series of talks this week between Chancellor Angela Merkel and European leaders and international officials. Italian Prime Minister Mario Monti has demanded that Germany do more to finance the euro-zone rescue. Now, according to an unconfirmed report in the German weekly magazine Der Spiegel, Mr. Monti and European Central Bank President Mario Draghi are calling for doubling the volume of the ESM to €1 trillion ($1.293 trillion) from the planned €500 billion.

German Finance Minister Wolfgang Schäuble, speaking on German television Sunday evening, rejected the demands to boost the ESM, saying Europe must first implement the decisions made at the December summit of leaders before coming up with fresh demands for more cash.

"We will stick to the agreement reached by the leaders in December and then see again in March if that is sufficient," said Mr. Schäuble, speaking a day before a meeting of European finance ministers and central bank chiefs to prepare the Jan. 30 summit of EU leaders.

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