Parliamentary Influence over Euro Bailouts 'Naive'

Spiegel
September 2, 2011

The German parliament is calling for increased authority in euro-zone bailout packages established by the EFSF backstop fund. But that could ultimately slow things down to a dangerous degree, economists warn. German commentators on Thursday make a plea for democracy.

Germany's parliament feels ignored. Until now, the Bundestag has had very little influence on decisions made by Chancellor Angela Merkel and her government regarding bailout packages for heavily indebted euro-zone states. But with expanded powers having been granted to the euro backstop fund -- known as the European Financial Security Facility or EFSF -- at a European Union summit in July, German parliamentarians also want a greater say.

On Wednesday, Merkel's cabinet agreed on the law necessary to expand the EFSF , a change which must be agreed to by all euro-zone governments. But the question as to how much influence the German Bundestag might ultimately have over EFSF bailouts was left unanswered, pending ongoing negotiations. Given the threat of a conservative revolt , Merkel has proven open to a compromise. Too many parliamentary defections from her Christian Democrats (CDU) and its Bavarian sister party, the Christian Social Union, in the late September vote could topple her government.

But on Thursday, several struck a more cautionary note, including German Finance Minister Wolfgang Schäuble, a leading member of the CDU. The EFSF , he said, must be able to "act quickly." As such, he said that the parliament must act responsibly with any influence it is granted.

Several economists went even further. "In a situation of market panic, the EFSF has to act quickly," Holger Schmieding, chief economist of Berenberg Bank, told the Financial Times Deutschland. "It could happen overnight or on a weekend." Guntram Wolff of the Brussels-based think tank Bruegel agreed. Parliamentary approval "must not take too long." But delays are inevitable, he told the paper, should the parliaments in all 17 euro-zone member countries be granted a say.

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