Germany Responds to Finance Crisis Parliament Approves Bank Bailout Package
German Chancellor Angela Merkel at the bailout vote on Friday: Only the Left Party and Greens opposed the package.Foto: REUTERS
Germany's federal parliament passed the country's biggest bailout package in postwar history on Friday. The conservative Christian Democrats and the pro-business Free Democrats, as well as the center-left Social Democrats voted 476:99 to approve the massive €500 billion ($670 billion) bank rescue bill, but the leftist Greens and Left Party opposed the financial markets stabilization bill.
Peter Struck, party whip for the Social Democrats (SPD), described the vote, taken after just a few days of debate as an "unprecedented tour de force." The package has also been approved by Germany's second chamber of parliament, the Bundesrat, which is controlled by the states. German President Horst Köhler plans to sign it later on Friday. It would go into effect on Monday.
The plan includes a €400 billion financial market stabilization fund to guarantee loans and €80 billion to recapitalize the banking sector through the government taking stakes in banks. An additional sum of €20 billion is being set aside to cover losses.
Prior to Friday's vote, both the Social Democrats and the Christian Democrats called on German banks to participate in the rescue package. The SPD's Struck said the banks would not remain "unscathed" and that they would be forced to make up for any losses covered by the support measures.
Christian Democrat floor whip Volker Kauder said banks had to do their share to help end the crisis, and that the government wouldn't help if they weren't willing to do their part. He called on credit institutions to show greater respect to smaller customers and depositors. And Struck warned managers to finally "get down off their high horses. Bankers' arrogance must be put to an end for good."
But politicians with the Green and Left parties complained that the package gave the federal government and parliament too little influence over the banks. "We can't permit ourselves to get involved in this," said Left Party whip Gregor Gysi. Fundamentally, however, both parties said they supported quick measures to restore trust and stability in the financial markets.
Meanwhile, German labor unions and the left-wing faction of the SPD also complained that the rescue package didn't go far enough to reduce the risk of recession, especially following a report earlier this week that downgraded the forcast for German growth in 2009 to 0.2 percent. Service industry union Ver.di, German's largest organized labor group, is calling for an economic stimulus package valued at least €10 billion.
"In light of the threat of an economic recession, we won't be able to get the financial markets under control," chief Ver.di economist Michael Schlecht told the Berliner Zeitung newspaper.
In the mid-term, he warned that the government would need to pump €40 billion a year into the economy. To finance the stimulus package, Schlecht called for increases of wealth taxes, corporate taxes and inheritance taxes.
Meanwhile, a leader of the left-wing base of the Social Democrats, Andrea Nahles, who is also one of the deputy heads of the national party, called for greater state intervention to boost the economy. Nahles wants a government stimulus package. "The government needs to make an investment to spur consumer spending," she told the Münchner Merkur newspaper. She also called for a planned 2010 introduction of a tax deduction on co-payments made by employees required by the national healthcare system to be brought forward to 2009. That, she said, "would add €9 billion to consumers' pocketbooks" next year.
dsl with wire reports