BERLIN (MNI) – Germany’s lower house of parliament, the Bundestag,
on Friday approved a bill on the country’s share of the financing in the
EU rescue plan for fiscally troubled member states.

The upper house of parliament, the Bundesrat representing the 16
states, will vote on the bill later today.

Given that Germany’s share of the loan guarantees foreseen under
the European aid package will come out of the federal budget, the
Bundesrat could only delay the bill but not block it indefinitely.
Still, it is not expected that the Bundesrat will delay the bill.

Chancellor Angela Merkel’s CDU/CSU-FDP government coalition lost
its majority in the Bundesrat earlier this month when the Merkel camp
was defeated in state elections in North Rhine-Westphalia.

However, a new state government in North Rhine-Westphalia has not
been formed yet, so the government can for the moment still bank on a
majority in the upper house.

EU finance ministers agreed earlier this month on a special fund to
raise up to E440 billion over three years through a “special purpose
vehicle” to aid fiscally troubled member states. Eurozone countries are
to guarantee the loans and the amount each country has to guarantee will
be calculated based on its share in the capital of the ECB.

Germany’s share will be up to E123 billion in loan guarantees plus
up to 20% on top of that in the case of “an unexpected and irrefutable
need,” the government’s bill states. This means that Germany’s full
share of the aid package could rise to around E148 billion in the worst
case scenario.

However, should the need arise, the budget committee of the
Bundestag would need to approve any loan guarantees beyond the E123
billion.

In its bill, the government points to a worsening of financing
conditions in some EU member states over a very short period which
cannot be explained by fundamental data.

“A further escalation of the situation would put the solvency of
these states at risk and would lead to a serious danger for
financial stability in the currency union,” it warned.

–Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com

[TOPICS: MT$$$$,MGX$$$,M$X$$$,M$G$$$,MFX$$$,M$$FX$,M$$CR$,MFGBU$]