As had been widely expected, a special session of German parliament on Thursday overwhelmingly approved emergency aid for Spanish banks from the temporary euro bailout fund, the European Financial Security Facility (EFSF).
A total of 473 of the 583 lawmakers present in the Bundestag voted in favor of the measure with Merkel's conservatives combined with the business-friendly Free Democrats, her junior coalition partner, offering broad support. Still, initial reports indicate that 22 lawmakers from Merkel's coalition voted against the package, reflecting growing skepticism of the chancellor's course in the euro crisis.
Despite sharp criticism of Merkel's handling of the euro crisis during the pre-vote parliamentary debate, the center-left Social Democrats and the Greens voted largely in favor of the aid package. The far-left Left Party voted against it.
The aid program is to have a duration of 18 months and is worth a maximum of 100 billion ($123 billion) though it is thought that Spain will only borrow some 62 billion. The emergency loan will be paid out in several tranches through the end of the year. Spain officially requested the bailout on June 25 after weeks of rising concern over the state of the country's banks, struggling under billions in bad debts related to the collapse of the Spanish real estate market in 2009.
Spain had initially been reluctant to request bailout funds due to previous rules that the bailout fund could not provide aid directly to banks and that any such assistance package would include strict austerity requirements. But unrest in the financial markets ultimately made the move unavoidable, as interest rates on Spanish sovereign bonds shot upward due to investor fear that Madrid would be unable to shoulder the burden of bailing out its banks on its own.
'A Difficult Path'
Furthermore, at a summit agreement in late June, European leaders agreed to change the rules governing the bailout fund, allowing the EFSF to loan money directly to Spain's national bank bailout fund FROB.
Still, several conditions have been attached to the aid program, including stricter oversight of banks receiving support from FROB and a ceiling on the salaries of executives working for those banks. Furthermore, the European Commission will monitor Spain's adoption of reforms requested by the EU, including an increase in the retirement age, tax reform and measures to liberalize the country's labor market.
German Finance Minister Wolfgang Schäuble defended the aid package during parliamentary debate prior to the vote saying that difficulties in Spain's financial sector could become "a problem for the financial stability of the euro zone." He emphasized that Spain alone is responsible for the repayment of the loan package.
Opposition leaders voiced vehement criticism of the government on Thursday, with Social Democratic floor leader Frank-Walter Steinmeier accusing Merkel of not having a clear plan and of not doing enough to explain to German voters what the ongoing euro crisis holds in store. "We have to say that this will be a difficult path, that it will take a long time and that it will include significant burdens for our own country," he said. "You should have been explaining it every day since May 2010," he said, addressing the chancellor, "but you don't because you fear the collapse of your coalition."
Thursday's vote took place during parliament's traditional summer recess, but members of parliament were called back to Berlin in a rare move. On June 29, Bundestag President Norbert Lammert of Merkel's conservatives admonished parliamentarians heading out on their holidays: "Don't swim too far out and make sure your carry-on baggage is within close reach."
cgh -- with wire reports
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