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The German Finance Minister, Mr Wolfgang Schaeuble, has rejected reports that the European Union and the International Monetary Fund (IMF) are working on plans to boost the size of the Euro zone’s financial rescue fund to support a partial debt default by Greece.
The German government is working together with its European partners to create the conditions for efficient use of the European Financial Stability Facility (EFSF), “but we have no intention to further replenish it”, he said in a TV interview on Monday evening.
He made those remarks after reports from the weekend meting of the IMF and the World Bank in Washington of a possible increase in the size of the EFSF to around €2 trillion from the present level of €780 billion caused new tension in Chancellor Angela Merkel’s increasingly shaky coalition.
Ms Merkel’s junior coalition partner, the Free Democratic Party (FDP), threatened to bring down the Government by denying it their votes in a crucial parliamentary vote on the Euro zone bailout fund on Thursday if any changes are planned.
Christian Lindner, General Secretary of the FDP, charged that Mr Schaeuble was working with the EU on new reforms of the EFSF even before Parliament approved the decisions taken by heads of state and government of the EU at their summit in Brussels on July 21 to expand the temporary bail-out fund and to give it new powers to avert a future debt crisis.
“Ms Merkel must urgently make clear that there will be no changes to the transaction basis of the EFSF,” he told journalists after a party meeting in Berlin.
Further reforms of the EFSF will not be acceptable to the FDP, he said.
Several proposals to stabilise the lingering Euro zone debt crisis emerged from the meetings in Washington, which were attended by the finance ministers and central bank governors from G-20 countries, media reports said.
They included increasing the size of the euro zone bail-out fund to €2 trillion, writing off about 50 per cent of Greece’s debts owed to financial institutions and strengthening big European banks, which could be hit by any default of national debt obligations.
Mr Horst Seehofer, the Chairman of the Christian Social Union (CSU), the Bavarian sister party of Chancellor Merkel’s Christian Democratic Union (CDU), also voiced his opposition to further increasing the size of the EFSF.
Mr Schaeuble said there are no plans to bring forward the start of the euro zone’s permanent financial rescue fund, dubbed the European Stability Mechanism (ESM), which is scheduled to replace the EFSF in mid—2013.
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