BERLIN (Reuters) - Berlin, under pressure to beef up its response to Europe’s debt crisis, wants the region’s permanent rescue fund to come into force a year early in 2012, media reported, a move a senior lawmaker in Chancellor Angela Merkel’s party said he backed.
With concern swelling about a possible Greek sovereign debt default as Athens struggles to meet the terms for its European Union and International Monetary Fund bailout, policymakers in the euro zone are readying for an escalation of the crisis.
Nobert Barthle of the Christian Democrats (CDU), who sits on parliament’s budget committee, told Reuters on Saturday an early introduction of the permanent European Stability Mechanism (ESM), currently due in mid-2013, would help frame a more forceful response.
Weekly news magazine Der Spiegel said in a brief preview of its Sunday edition that the German government would like the ESM to come into effect next year already, instead of 2013.
A finance ministry spokesman contacted by Reuters declined to comment on the possibility of bringing forward the ESM.
“I think it would make sense to push further in this direction,” Barthle said, arguing the ESM, with an effective lending capacity of 500 billion euros, will include Collective Action Clauses (CACs) preventing any one bondholder from blocking a restructuring deal at the expense of others.
Barthle said the CACs would be included in all euro zone government securities from July 2013 under the original timetable for the ESM, which has yet to be ratified by national parliaments after they first approve granting new powers to the region’s existing EFSF bailout mechanism.
Officials in Berlin have argued that the first priority is to get approval from parliament for granting new powers to the existing euro zone rescue mechanism, the European Financial Stability Facility, in a crucial vote on September 29.
Merkel already faces a potential revolt on the EFSF vote from some members of parliament in her ruling coalition who are increasingly skeptical about more aid for Greece.
If she is forced to rely on votes from the center-left opposition, who support the EFSF, it might trigger a confidence vote that could undermine the second two years of her second term as chancellor.
Citing finance ministry sources, Spiegel said one advantage would be to avoid more requests for collateral in exchange for contributions to Greek aid, as Finland has requested.
But Barthle’s main argument was that, by bringing forward the introduction of the ESM, “we could get access to the CACs sooner, which would be extremely helpful.”
“The banks must see that, if it came down to an orderly insolvency, they could not remain outside,” said Barthle.
Merkel said 11 days ago it was no longer “taboo” to talk about an orderly Greek default, and that the euro zone would lack a mechanism for such a scenario until the ESM comes into power in 2013.
“We do not currently have such a mechanism and that’s why the ESM has to come into force,” she said on September 13.
Additional reporting by Annika Breidthardt and Matthias Sobolewski; Writing by Stephen Brown; Editing by John Stonestreet