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Regional States Show Solidarity for Huge German Rescue Plan

The banking crisis has made bedfellows of rival parties across Germany's political spectrum, with a majority of parliamentarians agreeing that the regional states need to support the federal bailout.

Umbrella in German national colors: Black, red and gold horizontal stripes with lightening streaks resembling a plunge in stock index

The national umbrella rescue package involves all 16 German states

The Bundesrat, Germany's upper house of Parliament agreed to the government's 500 billion-euro ($683-billion-dollar) rescue package by a sweeping majority in spite of critics opposing the deal to shore up the nation's flailing financial institutions.

Even Bavaria, Germany's largest state which had been initially opposed to the plan, signalled its support. The state's finance minister Erwin Huber told the national news broadcaster ARD, "I don't want to see the (bailout plan) fall through."

The federal government expects the 16 regional states to cough up 35 percent of the cost, which combines an injection of capital with loan guarantees. German finance minister Peer Steinbrueck is meeting with his regional counterparts this week to discuss details of the rescue plan.

Oskar Lafontaine, Gregor Gysi, and German finance minister Peer Steinbrueck

Finance minister Peer Steinbrueck (right) and leftist political rivals work together

Germany is under an international obligation to do its share in regulating the turbulence caused by world financial markets, according to a constitutional clause of a federal reform law in 2006. The Bundesrat is likely to formally vote on the immediate implementation of the rescue package this Friday.

Some say states' burden is unfair

Bavarian finance minister Huber, however, did slam the federal government for pushing some of the burden onto the states.

"The nation calls the shots and the states pay the bill. This is not exactly fair play," he said.

Huber, who was recently forced out as the conservative Christian Social Union (CSU) party leader after Bavarian state elections last month, claimed that the states face a double burden since they are solely responsible for bailing out and insuring regional banks and savings institutions as well.

The premier of the tiny south-western state of Saarland, Peter Mueller, said that state participation in a federal bailout was inevitable with both state and federal interests intertwined.

"We need solidarity on this issue," said Mueller in a interview with the broadcaster Deutschlandradio Kultur .

Bailout makes bedfellows of political rivals

Other regions such as the heavily populated industrial state North Rhine-Westphalia and the south-western state Baden-Wuerttemberg, which is home to automakers such as BMW and Daimler, concur.

Even Berlin's economic deputy Harald Wolf of the opposition Left party told the German media: "The states have no choice but to support the federal plan."

Among the conservatives, Lower Saxony's finance minister Hartmut Moellring (CDU) told a regional broadcaster that the states needed to do their share in risky propositions, but also needed to take a lead role in transactions involving billions of euros.

Norbert Roettgen, the parliamentary leader of Chancellor Angela Merkel's governing Christian Democrat coalition, said it's a given that the states fulfil their financial obligations.

Green Party financial expert Christine Scheel warned leaders of the regional states on national television news broadcaster N24 to assume collective responsibility for the banking crisis.

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