Merkel bows under pressure to up bailout
German Chancellor Angela Merkel is prepared to expand the emergency bailout package for the euro, according to reports on Thursday.
The chancellor had previously opposed the move, but many non-euro countries, such as the United States, Britain, Japan and China have increased pressure for an expansion of the package.
“We will not be able to resist this pressure in the long-run,” Merkel said. If the package were to be expanded, Germany would be set to pay €280 billion into the fund. The country’s current share is €211 billion.
The European Financial Stability Facility (EFSF) is designed to help euro countries in serious financial trouble. The newspaper said Merkel is now thinking about raising the top credit limit from €500 billion to €750 billion. The final decision is expected to be made at the end of March.
The EFSF currently has €500 billion. Of that about half is available to be loaned out. This summer the EFSF is to be replaced by the European Stability Mechanism (ESM), which will have the ability to lend as much as €500 billion.
Public opinion in Germany has grown increasingly hostile to the bailouts, an attitude reinforced by negative media reporting. The perception that hard-working Germans are paying for the fecklessness of southern Europeans has become widespread.
German anti-Greek rhetoric has fuelled a rise in anti-German sentiment among Greeks, a country bordering on bankruptcy that has been a key target of EFSF funds.
The Süddeutsche Zeitung said due to Germany’s previous resistance to increasing the fund, European leaders are not expected to discuss the fund’s size at their meeting in Brussels Thursday and Friday. A final decision will most likely be made in April.
Germany is calling for the IMF to increase its fund for crisis management to $600 billion. Other IMF countries, such as the UK, have said they are only willing to agree to this if Merkel signs off on a higher euro stability fund package.