Merkel concedes – what will she get in return?
Last night in the European Council had the whiff of a hostage situation. The German Chancellor was locked in a room with the leaders of Spain, France, Italy making their demands’ and not allowing any other business to be agreed until they’d got their way on emergency relief for Spanish banks and Spanish and Italian government borrowing rates.
If the European Council statement had been issued in Angela Merkel’s handwriting it might have been in a very shaky hand. She committed in the early hours of this morning to what she had been only 48 hours earlier calling short-term “fake solutions” and “eyewash.”
The bail-out funds meant for strictly policed national government bail-outs will now be regularly used to buy poorer countries’ debt and support distressed banks to spare the national government taking on the burden.
Angela Merkel presumably thinks that the new centralised European governance over national banks she won back as a concession is some kind of quid pro quo. Germany and its wealthier north European allies think their Mediterranean partners often have too cosy relations with their countries’ banks.
She could get more trophies of a kind in today’s session if she gets some broad commitments to political union. But anything said right now on political union, based on an outline plan only published on Tuesday, might seem thin and unreliable to Angela Merkel’s audience back home.
Angela Merkel is supposed to be heading home after the Eurozone leaders’ lunchtime meeting to try to get a key vote supporting the bail-out fund through the German parliament.
Her tone, spin and demeanour will be very interesting to watch today. She looked stone-faced and tired this morning as she went into the Friday morning session of the full EU 27.
The direct money to Spanish banks is all about trying to avoid a mega, up-scaled version of what happened to Ireland, when the country took on the debts of the banks and the country itself then needed a bail-out.
Ireland, not surpisingly, has noticed changing the rules they played by seems a touch unfair. The burden of Ireland’s rotten banks amounts to about 20% of its GDP.
Last night, Enda Kenny got a guarantee written into the European Council conculsions that some sort of compensation will now be looked into – it could ease Ireland’s burden signficiantly, by billions of euros a year but Irish finance ministry sources are saying the engineering is still to be worked out, the numbers are not knowable.
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