German showdown with IMF looms as Bundestag blocks rescue funds

The Telegraph ^ | 2/23/2012 | Ambrose Evans-Pritchard, and Louise Armitstead

[bruinbirdman]

Germany's ruling parties are to introduce a resolution in parliament blocking any further boost to the EU’s bail-out machinery, vastly complicating Greece’s rescue package and risking a major clash with the International Monetary Fund.

“European solidarity is not an end in itself and should not be a one-way street. Germany’s engagement has reached it limits,” said the text, drafted by Chancellor Angela Merkel’s Christian Democrats and Free Democrat (FDP) allies.

“Germany itself faces strict austerity to comply with the national debt brake,” said the declaration, which will go to the Bundestag next week. Lawmakers said there is no scope to boost the EU’s “firewall” to €750bn, either by increasing the new European Stability Mechanism (ESM) or by running it together with the old bail-out fund (EFSF).

The tough stance reflects popular disgust in Germany at escalating demands. Bowing to pressure, Chancellor Merkel’s office said an increase in the ESM was “not necessary” since Italian and Spanish bond markets have recovered.

Germany is now on a collision course with world powers, the IMF and even key allies in Europe’s AAA-core. The Netherlands and Finland are willing to boost the EU firewall to €750bn.

The IMF has hinted it may cut its share of Greece’s €130bn (£110bn) package and warned that its members will not commit $500bn (£318bn) more in funds to ringfence Italy and Spain unless Europe beefs up its rescue scheme.

The US, Asia and Latin America are irked at the reluctance of Europe’s rich creditor states to put out the raging fires on their own doorstep. “The Europeans need to do more. That would unlock more support for the IMF from the other G20 countries,” said Augustin Carstens, Mexico’s central bank governor.

The spat came as Brussels warned that Euroland would relapse into recession this year, shrinking by 0.3pc.

[bruinbirdman]

From L'Hebdo, Lausanne

Greek bailout plan

The vicious circle

"... Alright, it's agreed..."

"... We'll lend you what you need to pay us back..."

[BfloGuy]

Sooner or later, someone will put an end to this slow-motion train wreck. I realize that we have nothing to brag about, but the Europeans have become caricatures of themselves.