German Chancellor Angela Merkel has canceled a planned speech to parliament in Berlin tomorrow because of a deadlock over proposals to leverage the European Financial Stability Facility to give it more firepower, three German lawmakers said.
“It’s a disappointing development but without any concrete proposal for increasing the efficiency of the fund the chancellor can’t present a complete set of proposals tomorrow,” Norbert Barthle the ranking member of Merkel’s Christian Democratic Union party on parliament’s budget committee, told reporters. Other lawmakers confirming cancelation of Merkel’s speech were opposition members Carsten Schneider and Priska Hinz.
“The French want more money from Germany than we are prepared to shoulder,” Otto Fricke, the budget spokesman for Merkel’s Free Democratic Party ally in parliament, told reporters today.
France and Germany are wrangling over the role of the European Central Bank in tackling Europe’s debt crisis. Finance ministers gather in Brussels tomorrow to set a common strategy, with European leaders scheduled to meet Oct. 23.
German lawmakers today said they will not sign off on proposals to enhance the firepower of the EFSF because of the disagreements.
As the summit approaches, the euro-region’s biggest financial backers Germany and France are still at odds over how to expand the EFSF’s firepower, accommodating new tools from precautionary loans to buying bonds in primary and secondary markets. Draft EFSF guidelines, obtained by Bloomberg News today, make no mention of how to boost its 440 billion-euro firepower.
France favors creating a bank out of the EFSF, boosting its financial clout with backing from the ECB, a proposal that Germany rejects, Finance Minister Wolfgang Schaeuble told lawmakers in Berlin this week. French Prime Minister Francois Fillon said today that the euro region should agree to use leverage to make the region’s financial support fund “massive.”
“It’s not the fault of the government or parliament but is a problem among the international partners,” Barthle said.
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