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Merkel annoys Europe with euro change

The Local · 25 Mar 2011, 08:04

Published: 25 Mar 2011 08:04 GMT+01:00

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Merkel, who has been increasingly criticized for her go-it-alone approach on the common currency – and more recently on nuclear power and intervention in Libya – insisted on a last-minute change to a €700 billion permanent rescue fund for the embattled eurozone.

The change means Germany will avoid having to pay a lump sum of €11 billion in 2013 – a payment the government feared would put its finances under too much short-term pressure and cause headaches during the next federal election.

Instead, it will pay five smaller payments each year from 2013 to 2017 to cover its €22 billion cash payment into the fund, which is being set up to bail out shaky eurozone members and keep the currency stable.

The victory will help Merkel’s Christian Democratic Union in key state elections, including the critical poll in the economic powerhouse of Baden-Württemberg on Sunday. These state polls are the prism through which many of Merkel’s recent decisions are being viewed by political analysts, most notably her closure of seven nuclear power plants and three month review of nuclear policy in the wake of the Japanese atomic plant crisis.

Economy Minister Rainer Brüderle inadvertently fuelled this perception when he reported told a meeting of business leaders that the nuclear reversal was simply an election tactic. The minutes of the meeting were quoted Thursday by daily Süddeutsche Zeitung.

As the eurozone’s biggest economy, Germany will pay €22 billion of the €80 billion cash that the fund will use. The other €620 billion will take the form of loan guarantees.

Merkel’s sudden change of direction ahead of the summit in Brussels where the package was being finalized has annoyed European partners.

“Merkel has to be clear that no deal stands until all the signatures are there,” one EU diplomat warned, according to daily Die Welt.

Story continues below…

According to Die Welt, Eurozone chief Jean-Claude Juncker, asked whether the group could have done without the last-minute extra negotiations, replied laconically: “Of course.”

DAPD/The Local/djw

The Local (news@thelocal.de)

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Your comments about this article

17:57 March 25, 2011 by DinhoPilot
Good for them... ^^
19:18 March 25, 2011 by storymann
you can't change the spots on a Leopard
09:21 March 26, 2011 by tallady
Germany has had and will have to in the future continue to put up the lions share of support for poor performing members,unfortunately bail outs mean the stronger EU countries lending more money to the weaker at lower rates than market rates, to try to tide them over to better times. There are hazards in this approach. If the stronger countries take on too much extra debt for the weaker countries, they start to undermine their own credit worthiness and drive up interest rates more generally . If the austerity programmes are linked to tight money and a relatively high exchange rate it is difficult to see how the captive weaker economies get to grow themselves out of trouble. Merkel's position reflects this.
20:21 March 27, 2011 by erkan
Why does Germany have to put so much money in , what about those

"freeloader Greeks " . Their rich hide their money or just don´t pay taxes

outright . Then they and Portugese retire after a few years on the job .

leaving Germany to pay their bills . They could at least give every German

a free 3 week holiday .
13:16 March 28, 2011 by DavidtheNorseman
@erkan - because the EU will put Germany in the drivers seat of Europe. With domination of the EU parliament and getting what will amount to tribute money from the other EU countries the Lords of Germany are making some short term cash outlays for being the directors of the Corporation. It remains to be seen if the wealth will trickle down to the Euroserfs of any stripe :-)

"The borrower will be the lender's slave."
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