I keep wondering when the tipping point will arrive for mass German protests against the bailouts or against the Euro itself. I do not have the answer, and perhaps it does not come.

However, not a week goes by without some bureaucrats somewhere, sometimes even within Germany, expecting more from German citizens.

Here is a case in point. Germany’s Finance Minister Wolfgang Schaeuble says Germany Needs To Contribute More To New ESM

Germany’s contribution to a future mechanism to rescue troubled euro-zone countries will need to be higher than its contribution to the current bailout fund, German Finance Minister Wolfgang Schaeuble said Tuesday.

The 17 countries using the euro Monday agreed a future bailout mechanism–or European Stability Mechanism–to be used from mid-2013 onwards, will have an effective lending capacity of EUR500 billion, the chairman on the Eurogroup of finance ministers and Luxembourg’s prime minister, Jean-Claude Juncker, said.

The euro zone’s European Financial Stability Facility that expires in mid-2013, has been set up for EUR440 billion, but its effective lending capacity is seen at around EUR250 billion, in part due to the aspiration to reach a triple-AAA rating for bonds raised by the EFSF. The European Union provides another EUR60 billion to the current rescue fund.

To ensure the new, post-2013 rescue mechanism will have EUR500 billion available in aid if needed, “Germany’s participation will need to be a bit higher,” than in the current fund, Schaeuble said at a press conference after meeting European Union finance ministers.

EFSF Agreement in Doubt

Note: Links in the following article are in German. I posted one of them. They all point to the same site, and a login is required.

Euro Intelligence comments EFSF agreement in doubt

There will be some agreement on March 24-25, but there is a potential for a major shock. Frankfurter Allgemeine, deeply hidden in a news story on yesterday’s Ecofin, writes that Wolfgang Schäuble said he was no longer sure whether they would deal with the EFSF in March.

Two weeks of reduced market panic, and the EU’s political system is reverting to its default mode of complacency. The European Council’s pledge to do whatever it takes the eurozone, and to agree a one-and-for-all crisis resolution mechanism is gradually being expose as the lie that it always has been.

There are also some legislative problems to overcome. Reuters reports that Finland, where elections are held next month, says that it can only approve an agreement reached at the special eurozone summit on March 11. If there were any material changes between Mar 11 and the Mar 24-25 EU summit, the Finnish government would not be able to sign off on those.

The Frankfurter Allgemeine article has some more details on the financing of the ESM, the successor mechanism. Ministers are discussing two models, one where the six AAA-rated countries alone increase their guarantees, which would involve a doubling of the German guarantee to €250bn, or if the non AAA rated countries would deposit cash. It looks as though the compromise will involve a mixture of both, but any increase in the German contribution would require a vote in the Bundestag (and this, as we reported this week, may require a two thirds majority).

There is an angry editorial in Frankfurter Allgemeine this morning, which complains that the likely German contribution to the ESM would amount to two-thirds of the federal budget, and would invariable trigger a total loss of sovereignty of the German parliament. (The latter is a particularly sensitive point, as the German Constitutional Court is extremely inflexible on that issue. If it views the EFSF/ESM as impacting the parliament’s sovereignty, the court could still jeopardise the project.)

Risks rise along with increasing complacency everywhere.

Mike “Mish” Shedlock
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