The Return of Politics (cont’d)

by Andrew Stuttaford
Today’s Eurozone panic revolved around France, but via the WSJ, here’s a reminder that the politics of rescuing the euro grow ever more tricky:

BERLIN—The friendly fire aimed at German Chancellor Angela Merkel is intensifying just when she needs all her time and energy to keep the euro-zone debt crisis from spiraling out of control.

Lawmakers from her Christian Democratic Union are digging in their heels against more aid for troubled euro-zone countries, and Ms. Merkel is enduring withering criticism from senior CDU politicians who accuse her of watering down the party’s conservative philosophy.

Moreover, a new poll shows that Ms. Merkel’s current coalition government wouldn’t even regain a majority if elections were held today. “The irritation with the European policy is growing,” CDU lawmaker Klaus-Peter Willsch said this week. Several dozen CDU lawmakers are feeling severe “pains of conscience” over approving recent changes to the European Financial Stability Facility—the euro zone’s rescue fund—agreed upon by European Union leaders at a July 21 summit, he added. Ms. Merkel is also feeling pressure from her euro-zone counterparts, many of whom want to see the EFSF increased in size to halt further contagion from the debt crisis. Ms. Merkel went along with her EU peers in allowing the EFSF to buy bonds in the secondary market. They also agreed to a fresh €109 billion ($154.55) aid program for Greece. Ms. Merkel wants the German parliament to approve both by late September. Top CDU lawmakers, such as budget spokesman Norbert Barthle, said this may just about be possible and that Ms. Merkel will get a majority for it. It isn’t clear exactly how many CDU lawmakers will defect, but the dissidents are definitely becoming more vocal.

And if an attempt is made to expand the EFSF to a size sufficient to backstop Italy & Spain (to, maybe EUR 2 trillion), how likely is it that Merkel will get the votes she needs?

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