Berlin fears cost of bailouts

Published on 13 April 2011 at 09:11

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Germany is beginning to have doubts about its participation in rescue schemes for the Eurozone. “Extent of guarantees unlikely,” headlines Handelsblatt, which quotes a report by a Bundestag experts group. The business daily reveals that the document drafted by a legal team from the German parliament warns against the hidden cost of the European Stability Mechanism (ESM) due to be launched in 2013.

The 500-billion euro fund will be financed by member states, which will also provide financial guarantees for member states in difficulty. However, the experts note that the provision of guarantees will “establish a process that parliament will not be able to control, which might lead to a situation where the amount to be paid is higher than expected.” If the Germany ends up paying too much, Handelsblatt points out, it will endanger its monetary stability, and also be in breach of its constitution. In anticipation of this risk, the newspaper reveals that, the Federal Court of Auditors believes parliament should determine the nature and amount of Germany’s contribution to the ESM.

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