ROME: German Chancellor Angela Merkel reiterated on Friday her opposition to allowing Europe's crisis funds to recapitalise debt-stricken banks directly, stressing that EU treaties did not allow this.
Asked following a meeting here with the leaders of France, Italy and Spain why she would not allow the EFSF and ESM to inject cash directly into banks, Merkel retorted: "It's not about allowing or not allowing."
The European Financial Stability Facility (EFSF) and its 500-billion-euro ($627-billion) successor the European Stability Mechanism (ESM) are "instruments of solidarity" but "you cannot have guarantees without control," Merkel explained.
"If I simply gave money to a Spanish bank, or other bank ... I can't say what that bank should change, because I'm not responsible. I'm the German chancellor, I can only say that to my banks."
"That's the problem we have. It's not that I do not want to (help) but the treaties are set up in such a way that the governments are the partners."
"We set up the EFSF and the ESM under such conditions and that's how we are going to continue," added the chancellor. Spain's finance minister Luis de Guindos said earlier Friday that the eurozone could be open to funnelling aid directly to ailing Spanish banks.
"The option is open," Luis de Guindos said on arrival for a second day of talks among European finance ministers in Luxembourg. Hours earlier, IMF chief Christine Lagarde called on the eurozone to provide direct aid to banks via the bloc's rescue fund to bypass national governments and avoid adding more debt to their books.
Lagarde said this was necessary "to break the negative feedback loop that we have between banks and sovereigns (sovereign debt)." Analysts are concerned that debt accrued by Spain to bail out its banks will force it into a full-blown bailout.
But Germany has always insisted that the rules which serve as a foundation for the EFSF and ESM be respected. First the bank's shareholders must come to its aid. If they cannot, the government concerned must inject fresh funds.
If the government itself is not able to help, then the government can apply to the European bailout funds. This aid is then attached to conditions. "Guarantees and control go together," Merkel noted.
indiatimes.com
Asked following a meeting here with the leaders of France, Italy and Spain why she would not allow the EFSF and ESM to inject cash directly into banks, Merkel retorted: "It's not about allowing or not allowing."
The European Financial Stability Facility (EFSF) and its 500-billion-euro ($627-billion) successor the European Stability Mechanism (ESM) are "instruments of solidarity" but "you cannot have guarantees without control," Merkel explained.
"If I simply gave money to a Spanish bank, or other bank ... I can't say what that bank should change, because I'm not responsible. I'm the German chancellor, I can only say that to my banks."
"That's the problem we have. It's not that I do not want to (help) but the treaties are set up in such a way that the governments are the partners."
"We set up the EFSF and the ESM under such conditions and that's how we are going to continue," added the chancellor. Spain's finance minister Luis de Guindos said earlier Friday that the eurozone could be open to funnelling aid directly to ailing Spanish banks.
"The option is open," Luis de Guindos said on arrival for a second day of talks among European finance ministers in Luxembourg. Hours earlier, IMF chief Christine Lagarde called on the eurozone to provide direct aid to banks via the bloc's rescue fund to bypass national governments and avoid adding more debt to their books.
Lagarde said this was necessary "to break the negative feedback loop that we have between banks and sovereigns (sovereign debt)." Analysts are concerned that debt accrued by Spain to bail out its banks will force it into a full-blown bailout.
But Germany has always insisted that the rules which serve as a foundation for the EFSF and ESM be respected. First the bank's shareholders must come to its aid. If they cannot, the government concerned must inject fresh funds.
If the government itself is not able to help, then the government can apply to the European bailout funds. This aid is then attached to conditions. "Guarantees and control go together," Merkel noted.
indiatimes.com
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