Photo: Travis Seitler
Germany has been one of the biggest obstacles in the way of returning the euro area to stability, and it still appears focused on doing everything it can to throw stones in the cogs of this European rescue plan.Just take this latest news from the FT—that Germany is once again preparing to block proposals to increase the “firewall” of funding EU leaders have at their disposal to mitigate contagion that could spread from a Greek default.
Increasing the size of the permanent European Stability Mechanism set to go in place in July was something EU leaders discussed at their summit late last month.
Its current €500 billion ($665 billion) is expected to be too small to adequately contain the adverse effects of a Greek default or other shocks from spreading to the stable but troubled Italy and Spain, even while Europe’s current €440 billion ($585 billion) bailout fund—the EFSF—is still in effect. Economists have estimated that funding to the tune of €2-3 trillion would be a more adequate sum to quell market fears.
Once again, the resilience of the German economy is proving the primary obstacle in the way of more activist measures to end the troubles of the eurozone, and that’s an ominous sign ahead of what will be the first developed market default in 60 years.
“We are confident we’ll get a majority of our lawmakers to back the new Greek programme,” said one official cited by the FT. “But helping Greece has always been a tough sell, and we want to avoid any subjects that could complicate the vote.”