Merkel NOT a problem for Enda. The German election is next year. She knows what she has to say. Enda Knows what she has to say. Both know it is bullshit. The Euro will survive because of the Bullshit Sterilisation Regime called the ESM.

Merkel delivers big setback to Kenny’s debt relief hopes


GERMAN CHANCELLOR Angela Merkel has upended a carefully crafted plan
to resolve Europe’s banking crisis, delivering a sharp setback to
Taoiseach Enda Kenny as he battles for a debt relief deal.

Moments after Mr Kenny declared in Brussels that he had achieved solid
progress overnight at a tense EU summit, Dr Merkel moved abruptly to
curtail the scope of the effort to break the link between bank and
sovereign debt.

The chancellor’s intervention, which took high-level EU figures by
surprise, has cast a new cloud of uncertainty over the feasibility of
Mr Kenny’s demands.

For the first time in public, she backed her finance minister Wolfgang
Schäuble in his assertion that national bodies must remain responsible
for most banking debts.

This is markedly at odds with the push from Mr Kenny and the leaders
of France, Italy and Spain for the European Stability Mechanism
bailout fund to pay for historic banking losses.

The question of who takes responsibility for “legacy” banking debts
has emerged as one the most sensitive issues to be settled in complex
talks on the recapitalisation of stricken banks by the ESM.

Although EU leaders decided at the summit to farm out this discussion
to euro zone finance ministers, Dr Merkel pre-empted these talks even
though the EU leaders did not address this question at the summit.

Their focus had been on fixing a January 1st deadline for a legal
agreement on new powers for the European Central Bank to supervise
commercial banks, a precondition for direct ESM aid to banks.

This was a “very progressive” step forward, Mr Kenny told reporters.
“So that’s good news from that point of view for Ireland and for

It was only shortly afterwards, in a briefing room down the corridor
from where Mr Kenny held his own press conference, that Dr Merkel

Answering a reporter’s question about the possibility that any ESM
rescue of Spain’s banks would damage her re-election campaign next
year, she ruled out the fund taking on retrospective liabilities.

“I hadn’t even thought of the elections before hearing such ideas
here. The capital needs of Spanish banks have just been evaluated and
a programme for their recapitalisation has been agreed,” she said.

“Spain only needs to ask for the tranches of funds. There will be no
retroactive direct recapitalisation, either.” These remarks were
immediately seen as an implicit rebuff to the demands of Mr Kenny and
his supporters for a mutualisation of banking debt.

A German government spokesman in Berlin later said her remarks were
simply a reiteration of the current legal position and that there was
nothing new in them; they were not about Ireland.

In Dublin, the Government spokesman also sought to play down the
significance of her remarks.

“We understand that Chancellor Merkel was asked a direct question
about the recapitalisation of Spanish banks and she replied in that
context,” he said. His statement also noted that the pledge by EU
leaders to sever the loop between bank and sovereign debt still

The possibility of the ESM paying for existing bank debts is crucial
for Spain, given fears that its banking crisis could overwhelm the
government of premier Mariano Rajoy.

This, in turn, has prompted anxiety in France and Italy that any
escalation of the Spanish banking emergency would affect them.

Top-ranked French officials said the notion of the ESM taking on
historic debt was seriously in play in the wake of the summit. “The
discussion we must have is to guarantee the retroactive effect of
this, which is very important vis-à-vis the markets. It will take some
time – weeks or months,” a senior Elysée figure said.

“It’s important to reflect on the stability of the euro zone and how
to deal with this historic problem.”