Germany's Schaeuble back against euro zone firewall

Thu Feb 23, 2012 10:15am EST
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By Annika Breidthardt and Paul Taylor

BERLIN/PARIS (Reuters) - German Finance Minister Wolfgang Schaeuble is in for a torrid weekend in Mexico City.

Chancellor Angela Merkel is so concerned to get a second bailout for Greece approved by her parliamentary majority next Monday that she has hardened Berlin's stance against any increase in the euro zone's financial firewalls.

As a result, Schaeuble will face the combined forces of the International Monetary Fund, the United States, China, Japan and most of his European partners at a G20 finance ministers' meeting demanding that Europe does more to fight its sovereign debt crisis before they will offer an extra cent.

European Union leaders had hoped that after getting its way on a new fiscal discipline treaty, Germany would relent and agree at a March 1 summit to combine the firepower of Europe's existing temporary bailout fund and a planned permanent one.

That in turn could open the way for the IMF to increase its contingency fund for helping states hit by the crisis.

But Merkel's spokesman Steffen Seibert said on Wednesday: "The German government's position has not changed - that means no, it is not necessary."

"What was agreed with partners (in December) was that in March there would be an examination of the size," he said, adding that conditions on the bond markets for stressed euro zone states such as Italy and Spain had improved since then.

The European Commission has made clear it will recommend running the two rescue funds in parallel to provide stronger protection against the risk of financial contagion.   Continued...

Germany's Finance Minister Wolfgang Schaeuble holds a news conference after a Eurogroup meeting in Brussels February 21, 2012.    REUTERS/Yves Herman