Instead of spending the day with their families on summer vacation, German parliamentarians have been dragged back for a special session on Thursday in Berlin to debate whether to approve aid for troubled Spanish banks.
"Don't swim out too far," said President of the German Bundestag Norbert Lammert at the last session of parliament before the summer break on the evening of June 29.
Lammert was dropping a hint that lawmakers could well be called back for a special session as a result of the twists and turns of the eurozone crisis.
Plenty is happening this summer, too much, in fact, for German parliamentarians to wander to far from home shores.
The Spanish government is continuing talks with its European partners about aid for its troubled banks. Meanwhile, the troika - the European Commission, the International Monetary Fund and the European Central Bank - have their bags packed for a trip to Greece, where the group will review whether the country has met its targets to receive another tranche of aid. Their report is due out next week.
But already last week, German parliamentarians had received notification of a special session to debate aid for Spanish banks.
Most Bundestag members agree that aid is necessary to prevent key Spanish banks from bankruptcy. But not all of them: the left-wing fraction and some parliamentarians from the other parties oppose the move.
And many in the opposition have made it clear to Chancellor Angela Merkel that they are growing increasingly concerned about what comes after the bailouts.
Loss of trust
Since the financial crisis emerged in 2008, eurozone nations have been contributing to funds to help those members in financial trouble. As a result, some of them have lost the trust of capital markets, confronted with horrendously high interest rates to finance their debt. A European bailout fund was created to help these countries.
For the first time, ailing Spanish banks could be able to tap into rescue funds without having to make a trip to the country's federal treasury first. The provisional European Financial Stability Facility (EFSF) would come to the rescue, as the permanent European Stability Mechanism (ESM) has yet to kick in due to a German constitutional dispute.
Despite the direct payment, the Spanish state would be liable under the current rules for banks that nevertheless declare bankruptcy.
The opposition in Berlin, however, has grown sceptical about whether these rules will remain valid in the future. They're worried that regardless of whether governments plunge into debt to prop banks or assume liability for them, the risks in both cases will drive up interest rates for government bonds.
Determined to eliminate these risks, government leaders meeting at the recent European Union summit agreed that the ESM could be used to directly aid banks but only after the launch of a European banking regulator, which would fall under the wing of the European Central Bank.
It appears in the logic of this agreement that the ESM would be liable and thus also the countries that pay into the rescue fund. This is how Eurogroup head Jean-Claude Junker, EU Monetary Affairs Commissioner Olli Rehn and recently appointed ESM head Klaus Regling interpret the agreement as well.
That view, however, has drawn hefty criticism from the opposition.
If Angela Merkel intends to transform the rescue of states into a rescue of speculating banks, then she will have to do so with her own majority and against opposition from the Social Democratic Party," said party chief Sigmar Gabriel earlier in the week.
"Numerous opposition party members have called on Chancellor Merkel to clarify whether or not German tax payers would be forced to take responsibility for foreign banks. And even a member of her coalition government, Horst Seehofer, head of the Christian Social Union (CSU), voiced his concern.
In a television interview, Angela Merkel noted that no decision has been made which would assume liability for direct aid to banks. She said a first step is for the European Commission to make a recommendation for a European banking regulator. And in the end, she said, the Bundestag would take a vote.
Author: Peter Stützle / jrb
Editor: Joanna Impey