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Alemania apoya el aumento del fondo de rescate.
Updated March 26, 2012, 9:23 a.m. ET
Germany Backs Boost to Bailout Fund
By WILLIAM BOSTON
BERLIN—Germany is officially backing down from its strict stance against boosting the euro zone firewall, seeing itself isolated as international pressure grows on Europe to boost its protections against the spread of financial contagion.
For weeks, German Chancellor Angela Merkel and her finance minister Wolfgang Schäuble have been under constant attack for appearing to stand in the way of a significant boost to Europe's permanent bailout fund, the European Stability Mechanism, and its temporary fund, the European Financial Stability Facility.
Germany has been staunchly opposed to raising the planned €500 billion ($664 billion) ceiling on the ESM, but has left the question of the EFSF open until now. It was widely believed that the EFSF would be retired as soon as the ESM is launched and that the EFSF loans already awarded would be assumed by the ESM, reducing its future lending capacity. But now Berlin is suggesting allowing the EFSF to run longer and by doing so ensure that the ESM can use its full lending capacity, effectively boosting the firewall to about €700 billion.
"We are saying that the ESM should permanently have €500 billion," Ms. Merkel told a news conference in Berlin on Monday. "The EFSF will expire in the middle of next year as planned. But about €200 billion has already been awarded and we can imagine that this €200 billion (in loans) could run parallel to the ESM until it has been paid back by the program countries."
The compromise would allow Europe to demonstrate that it had a larger firewall in place but simultaneously wouldn't require Germany to put up any further cash—even though German guarantees for the firewall will rise beyond the current €211 billion.
This is a crucial point for Ms. Merkel because she could face voter backlash and a potential rebellion within the ranks of her coalition should she make a complete turnaround and commit Germany to putting up more cash for the ESM. As it now stands, people familiar with her thinking say Ms. Merkel will be able to tell voters that she is only agreeing to allow existing commitments to run longer than planned, but not committing any more money.
Germany's main opposition Social Democrats attacked the chancellor, saying she has crossed the line that she has always promised voters she wouldn't exceed.
"Merkel has caved in again," said Thomas Oppermann, the chief whip in parliament for the SPD. "The chancellor is not honest and does not tell people how high the costs for the euro rescue really are."
The EFSF has so far lent about €192 billion to Greece, Portugal and Ireland, the three euro zone members that are being monitored by the troika, a commission of experts from the European Commission, the European Central Bank and the International Monetary Fund. The loans are multi-year loans whose maturities differ on a case-by-case basis. Germany's proposal suggests that the EFSF would continue to operate as a manager of those loans for as long as it takes the borrowers to repay them.
Until now, people familiar with the government's thinking and senior allies of Ms. Merkel in parliament have suggested that €200 billion to €250 billion in unused credits from the EFSF could be available in parallel to the ESM, which would have meant a much larger European bailout fund. This solution would have increased the firewall's lending capacity to as much as €750 billion and kept the EFSF intact to manage the loans it had already awarded.
A third proposal from the European Commission, which never had a chance with the Germans, was to simply combine the full capacity of the ESM and the €440 billion EFSF into one €940 billion bailout fund.
The German proposal is aimed at ensuring that the ESM is able to use its full lending capacity if needed, but also to guarantee that it cannot exceed the €500 billion ceiling.
The compromise position would effectively boost the European firewall but it wouldn't require Ms. Merkel to seek approval for Germany to increase its exposure to the European bailout funds, allowing the German chancellor to side-step a political landmine and prevent German backing for the ESM to become a divisive issue during two crucial state elections in May that could have an impact on Germany's ruling coalition government.
Germany remains opposed to building a huge firewall. People familiar with the government's thinking say Ms. Merkel and her allies don't believe that the firewall itself can be effective. They say that no matter how large the firewall, financial markets will always test it. And if the firewall is so large that it appears too expensive for European governments to uphold, it will also become ineffective and lose its deterrent value.
The German chancellor believes that it is important to fight the next crisis now by shoring up Europe's monetary union through structural and legislative reform—a key component of the fiscal pact. But Ms. Merkel fears that building a huge firewall could give European governments a false sense of security and take the pressure off governments to implement lasting budget reform.
"If we look at the interest rates in Portugal but also the recent interest rate moves in Spain it is clear that much has improved in the euro zone but the situation has not returned to normal," she said. "We are going to have to deal with the debt crisis for a long while yet."
European finance ministers are expected to make a decision on the future of the European firewall at an informal meeting in Copenhagen on March 30-