German lawmakers approve euro rescue package
Friday, May 21, 2010; 12:00 PM
The lower house of the German Parliament, the Bundestag, voted 319 to 73 in favor of the package, which was put together two weeks ago. There were 195 abstentions. The upper house, the Bundesrat, passed the measure later in the day, sending it to Germany's president to be signed into law.
Under the plan, Germany is to provide as much as $184 billion in loan guarantees to debt-ridden states in the euro zone to backstop the European currency and protect the nations from default. The package follows an earlier rescue for Greece. As Europe's largest economy, Germany contributed nearly $28 billion to the Greek package.
The vote comes a day after a German crackdown on financial speculators threw global markets into a tailspin, sparking the largest losses on Wall Street in a year, infuriating other European powers as they try to stabilize the ailing euro and raising questions about the ability of world leaders to coordinate their efforts at financial reform.
The measures announced unilaterally in Berlin earlier this week took U.S. and European officials by surprise, and they run counter to the broad pledges of cooperation that leaders of the world's top economies said would guide their overhaul of financial regulation. Instead of shoring up confidence in Europe's ability to address an array of economic problems, the actions -- including an outright ban on some types of aggressive stock trading -- seemed to backfire and spotlight divisions in the euro zone.
The fallout from Germany's actions hit Wall Street hard. Coupled with disappointing U.S. economic news, it forced the Dow Jones industrial average down 376 points, or 3.6 percent, on Thursday.
Germany, angry over pressure to bankroll its spendthrift neighbors, intends on Friday to press the 15 other countries that use the euro to follow its lead in setting strict caps on budget deficits to maintain fiscal order in the region. But the proposal faces significant opposition. And the tensions are highlighting the squabbling over the region's handling of the debt crisis, further eroding investors' confidence in the currency.
Still, German Chancellor Angela Merkel insisted in a speech that Germany is committed to its own path -- including stricter regulation of the speculative trading it thinks is damaging the euro and a new financial transaction tax that has lost favor in some other European countries and in the United States.
At stake is "more than a currency," Merkel told the German Parliament on Wednesday, blaming speculators and high-spending neighbors for the euro's woes. "We are called on to preserve the European vision. If the euro fails, then Europe, too, will fail."
European officials appeared caught off guard, and they declined to follow. "It's important that member states act together," Michael Barnier, the E.U. commissioner for financial regulation, told reporters in Brussels. The French finance minister, Christine Lagarde, meanwhile, spent Thursday deflecting Merkel's suggestion that the euro is "in danger."
"I absolutely do not believe that the euro is in danger," Lagarde told France's RTL Radio.
German and French leaders later Thursday pledged to cooperate on financial reform and other issues. The worsening situation also led U.S. Treasury Secretary Timothy F. Geithner to alter his schedule and add stops in Britain and Germany to the end of his trip to China. Geithner is to meet with senior European officials to discuss the crisis.