Trapped in a never ending spiral of throwing more Euros (still wet from ink) after bad, the German’s say no to providing direct aid to banks.
A New Dispute over Euro Rescue Fund
Spain Wants Billions For its Banks
A number of euro zone countries and senior officials at the European Central Bank would like to see the euro bailout fund changed so that it can provide direct aid to banks. This could help Spain, which has emerged in recent days as a new center of the euro crisis, but Germany is opposed.
Germany Rejects Bank Support
Some senior representatives of the European Central Bank are also backing the proposal because it would mean that the ECB would no longer be alone in its efforts to stabilize the European banking sector. In recent months, the ECB has lent commercial banks a total of more than €1 trillion in cheap money in an effort to stop a credit crunch last seen after the collapse of the Lehman Brothers investment bank in 2008.
But it would also entail a number of losers — namely the most important EFSF donor countries, led by Germany, because they would no longer be able to force countries obtaining the aid to push through reforms. In the event of a bank’s collapse, the money those countries had lent would also be lost.
In Berlin, German officials have firmly rejected the proposal. “Spain doesn’t need an aid program, and if it were to need one, then only under the known conditions,” a government source told the newspaper.