MERKEL’S PERMANENT EURO-RESCUE PLAN NEEDS OPPOSITION BACKING

Brussels, February 14- Chancellor Angela Merkel will need opposition support in Germany for a planned permanent euro-area rescue mechanism that aims to enroll private investors in future sovereign debt crises, a parliamentary report showed.

As European Union governments work on the post-2013 successor to the 750 billion-euro ($1 trillion) rescue fund, constitutional lawyers in Germany’s lower house of parliament have concluded that Merkel needs a two-thirds majority for the measure to pass in a vote. The threshold is higher than the simple majority in regular votes because it risks breaching constitutional budget rules.

“The implications are massive for Frau Merkel -I see a huge wall to climb to get a majority and it may be one that is just too high,” Frank Schaeffler, a lawmaker with Merkel’s Free Democratic Party coalition partner who commissioned the report, said today in an interview. The study “is explicit: beware eroding parliament’s fundamental right to control the budget and try to do so at your own peril”.

The report adds to Merkel’s headaches three days after she lost Bundesbank President Axel Weber as the German front-runner to become the next head of the European Central Bank, and as she prepares for two March EU summits that will determine Europe’s response to the debt crisis that threatens Portugal and Spain.

Facing elections in seven of Germany’s 16 states beginning on Feb. 20, Merkel is already hemmed in by voter resistance to further aid for indebted nations and a Free Democratic coalition partner that refuses to contemplate changes to existing crisis- fighting tools. Germany, as Europe’s biggest economy, is the largest country contributor to the rescue fund.

Hardly possible

Amending the rescue fund’s remit means the parliament ceding fiscal powers on a scale that it is “hardly possible to foresee,” said the report. “Democratic legitimacy” for German support “is that much higher the graver the risks for future generations beyond the current legislative period”.

Merkel secured a commitment from fellow EU leaders in December for a change to the EU treaty to provide for a permanent rescue facility, known as the European Stability Mechanism. She won a concession that investors will be made to share in the cost of any future crisis on a case-by-case basis.

The government controls 332 seats in the 622-seat lower house, the Bundestag, enough to ensure legislation passes by a simple majority. Yet a two-thirds requirement would need 83 opposition lawmakers to come on board to achieve the 415 votes necessary to pass the law. The ESM would also need to be put to the upper house, the Bundesrat, where Merkel lacks a majority, according to the report.

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