GERMANY: Euro Rescue Package
BERLIN — The German government approved its share of the bold $1 trillion rescue package for the euro on Tuesday, hoping to get swift support by parliament and to further stabilize the troubled European currency.
Chancellor Angela Merkel’s cabinet adopted plans for legislation promising German guarantees for at least euro123 billion ($157 billion) in loans, a government official told The Associated Press. He declined to be named in line with government policy.
The measure is part of a euro750 billion package agreed by European Union members and the International Monetary Fund last weekend.
The package helped boost the currency and stock markets Monday, but by early Tuesday the cherish mood seemed to fade and the euro slipped to $1.2670 in European midday trading — down from $1.2804 in New York late Monday.
French Finance Minister Christine Lagarde tried to bolster the currency Tuesday saying the euro is “solid.”
She said European leaders realized that strong action was needed when institutional investors began to lose confidence last week in the 16-nation currency.
The 27 EU member states had adopted the plan after frantic talks lasting into the early hours of Monday. It consists of a euro60 billion ($76 billion) European Commission lending program, euro440 billion ($560 billion) in new loans by the 16 euro nations, and euro250 billion ($318 billion) from the IMF.
Germany’s share is at least euro123 billion but could go up to euro150 billion, according to opposition politicians informed by Merkel Monday afternoon. Germany will have to shoulder more if countries facing financial troubles of their own should be unable to hand out loans.
Opposition leaders Juergen Trittin of the Greens and Gregor Gysi of the Left Party voiced dissatisfaction that it remained unclear how much the German taxpayer will be billed and what the government plans entail.
Economist Christoph Schmidt, a top government adviser, also criticized the plan. “That is really not how we wanted the common European currency,” Schmidt told the mass circulation Bild’s Tuesday edition.
“What is happening is the opposite of what we Germans thought to be stable currency policy and an independent European central bank.”
He said the European governments simply bought some time with the package without defining clear conditions like reducing the debt of member states.
Government and opposition parties were to start discussing the German measure later Tuesday. It is supposed to go to the floor next week but will likely not be adopted before June 4.