Thursday

25th Aug 2016

Bundestag approves Spanish bailout with large majority

  • (Photo: BriYYZ)

The German Parliament on Thursday (19 July) approved a bailout for the Spanish banking sector of up to €100 billion, despite criticism that Berlin is funding a "bottomless pit."

Members of the German Bundestag summoned back from holidays for a special session approved - by 473 votes in favour, 97 against and 13 abstentions - a demand by finance minister Wolfgang Schauble to approve Germany's contribution of up to €29 billion to the Spanish bank bailout.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

Schauble said Madrid was carrying out the necessary reforms of the labour market, pension and health systems. But the country's financial sector needs a bailout to buy more time and avoid being shut out from markets, after the real estate sector crashed leaving banks with piles of bad loans, he added.

"Even the appearance that Spain will not be able to recapitalise the banks on its own can lead to contagion and then it becomes a problem of financial stability for the whole eurozone," the German minister said.

Following a decision by the constitutional court, the German parliament has to approve each financial assistance programme from the eurozone's temporary bailout fund, the European Financial Stability Facility.

The details of the package are to be agreed upon on Friday during a conference call of eurozone finance ministers, at the end of which Spain is expected to officially sign the 'memorandum of understanding' spelling out what the terms and conditions are.

Each bank that will receive bailout money will be evaluated by an external auditor and the insolvent ones will be closed down, Schauble said. Bank managers will have to take a pay-cut and state aid will come only after own resources are exhausted, he added.

In addition, the Spanish government "obliges itself" to strictly adhere to the European Commission's recommendations on reducing its budget deficit, improving its competitiveness and boosting employment.

Schauble said that the loan will be contracted by the Spanish government - represented by a bank resolution fund (Frob) - and that the government will remain liable for paying back the money.

A June summit deal allowing the eurozone bailout fund to directly recapitalise banks - keeping the debt off the government's books - will only come into place once a eurozone-wide banking supervisor is in place.

But getting this new authority up and running is expected to take at least a year, even though a political agreement to set it up may be reached by the end of this year.

Cyprus

Schauble also noted that Germany's contribution may slightly increase if Cyprus goes ahead with a request to be exempt from bailing out Spain's banks. Debt-ridden Nicosia is also in line for a bailout. "In that case our contribution would rise from €29.07 billion to €29.13 billion," he said.

The contribution was approved despite stern remarks from both opposition and ruling coalition MPs. Social-Democrat leader Frank-Walter Steinmeier criticised the continuous German contributions to a "bottomless pit."

"It's always the same story, about the southerners lacking discipline and the need for Germany to teach them some," he said. "But nobody believes this story anymore. I cannot remember how many self-imposed red lines you have crossed. People don't understand anymore where you want to go."

Liberal leader Rainer Bruederle said Germany is "not your nice uncle or aunt handing out candy", while the Greens criticised the fact that the bailout will go to the banks, rather than to the real economy.

Stakeholders' Highlights

  1. EFASpain is not a democratic state. EFA expresses its solidarity to Arnaldo Otegi and EH Bildu
  2. UNICEFBoko Haram Violence in Lake Chad Region Leaves Children Displaced and Trapped
  3. HuaweiMaking Cities Smarter and Safer
  4. GoogleHow Google Makes Connections More Secure For Users
  5. EGBAThe EU Court of Justice Confirms the Application of Proportionality in Assessing Gambling Laws
  6. World VisionThe EU and Member States Must Not Use Overseas Aid for Promoting EU Interests
  7. Dialogue PlatformInterview: "There is a witch hunt against the Gulen Movement in Turkey"
  8. ACCAACCA Calls for ‘Future Looking’ Integrated Reporting Culture With IIRC and IAAER
  9. EURidNominate Your Favourite .eu or .ею Website for the .EU Web Awards 2016 Today!
  10. Dialogue PlatformAn Interview on Gulen Movement & Recent Coup Attempt in Turkey
  11. GoogleA Little Bird Told us to Start Tweeting About Google’s Work Across Europe. Learn More @GoogleBrussels
  12. Counter BalanceThe Trans Adriatic Pipeline: An Opportunity or a Scam in the Making for Albania?

Latest News

  1. Let's fix EU copyright law, for innovation and creativity online
  2. French government tries to defuse burkini row
  3. EU to Turkey: Do you really want to join?
  4. US slams EU competition policies
  5. French diesel committee 'did not cover up for Renault'
  6. EU backs Greek ex-data chief over criminal charges
  7. EU must step up migrant relocation, say Italy and Greece
  8. Merkel seeks post-Brexit vision on EU tour