Reuters: Regulatory News: Merkel MP says Bundestag must ok any direct bank aid

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Merkel MP says Bundestag must ok any direct bank aid Jun 29th 2012, 12:41 BERLIN, June 29 | Fri Jun 29, 2012 8:41am EDT BERLIN, June 29 (Reuters) - Direct recapitalisation of banks via Europe's permanent rescue fund must first be approved by Germany's lower house of parliament before it can be implemented, a budget expert for Angela Merkel's conservatives, Norbert Barthle, said on Friday. Euro zone leaders agreed earlier on Friday to bend their aid rules to shore up banks and bring down the borrowing costs of stricken members like Italy and Spain, in an attempt to solve the bloc's two-year old debt crisis. Under the agreement, the European Stability Mechanism (ESM), would be able to recapitalise banks directly without increasing a country's budget deficit. "The direct recapitalisation of banks through the ESM would, in my opinion, represent a new aid instrument of the ESM that the plenary of the German Bundestag (lower house) must first agree to," said Barthle in a statement. The Bundestag, which is set to vote on the ratification of the ESM and Merkel's "fiscal pact" later on Friday, is already likely to reconvene during the summer recess to sign off on the rescue packages for both Spain and Cyprus. Tension between Germany's democratic principles and a push to give Brussels more power to intervene in national policy appears to be approaching breaking point. In a series of rulings since 2009, Germany's constitutional court in Karlsruhe has expressed reservations about the steady transfer of power to Brussels, and affirmed the right of Germany's parliament to vet decisions taken at European level. Speaking of the recapitalisation of banks, Barthle said: "Clearly such aid would also only be guaranteed under strict conditions and control." Merkel has insisted the deal at the summit to use the rescue funds to ease Spanish and Italian borrowing costs without extra austerity measures, and to recapitalise banks directly, did not violate her mantra of no aid without conditionality. Link this Share this Digg this Email Reprints

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