Will the EU Bailout Burden German Taxpayers?

A new bailout giving Europe credit worth as much as 10% of the country’s economy has some German (NYSE:EWG) lawmakers saying an intolerable burden will be put on taxpayers. The fund, called the European Financial Stability Facility, might give loans to countries “before they face difficulties raising funds” in bond markets, according to draft guidelines obtained by Bloomberg. The document also says the European Financial Stability Facility should buy any more bonds in the primary market than private investors do.

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Frank Schaeffler, a lawmaker specializing in finance affairs from Merkel’s Free Democrat Party junior partner, said in an interview today “If you open the door to credit facilities of this enormous scale, they’ll be tapped. This is not what we mean by ring-fencing Italy (NYSE:EWI) and Spain (NYSE:EWP). How can we create a fund big enough for this? This is surely not in Germany’s interest.”

At the end of last year, according to figures published by the International Monetary Fund in Washington, Italy’s (NYSE:EWI) real gross domestic product stood at 1.6 trillion Euros ($2.2 trillion). Germany (NYSE:EWG) and France (NYSE:EWQ) are still in disagreement over how to increase the EFSF’s firepower.

France (NYSE:EWQ) wants to make a bank out of the EFSF, improving its financial power with backing from the European Central Bank. According to Finance Minister Wolfgang Schaeuble Germany (NYSE:EWG) is against this plan. Schaeuble told reporters in Berlin today “Some would favor turning to the ECB. This is ruled out by European treaties. There can be no doubt that the German government will never agree to such a solution.”

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