A good portion of the diplomatic match that will be played on Thursday and Friday at the European Council in Brussels concerns the so-called permanent stabilization fund or European Stability Mechanism (ESM), destined to replace the EFSF starting from mid-2013. Signed on 11 July by the seventeen states of the Eurozone, the Treaty which regulates this vehicle modifies art. 136 TFEU and has yet to find approval in various national parliaments, including the German one. With an authorized capital of €80 billion to be paid in five installments by 2016 and an effective financial capacity of €500 billion (compared to the original €440 billion of the EFSF), the fund will issue securities with collective action clauses i.e. it will institutionalize the possibility of a debt haircut and will be able to rake in the bonds of countries in refinancing difficulties on the primary and secondary market.
Uncertainty, however, continues to reign supreme both on the date of its entry into force, and on its effective endowment, and finally on the involvement of private individuals in the possible restructuring of the debt. Given the precipitation of the situation, the European Commission has asked to bring forward the activation to 2012 and to exclude the participation of investors in the rescue plans, an option never fully digested by the French. The transformation of the fund into a bank is also on the table. All changes that would in any case require a new treaty with respect to the one signed in July. On this point, Germany now seems ready to take a few steps back, as the German Chancellor herself admitted in last Monday's meeting in Paris with the French President. The counterpart to having more stringent control rules on national budgets in fact passes from the abandonment of some positions considered excessively rigid by Berlin. This would be yet another change of course, not least also for the ESM, whose nature as a privileged creditor was first affirmed, then denied and finally reaffirmed again. Beyond the financing difficulties that the EFSF is already suffering, these continuous changes in the rules of the game certainly do not help to restore security and stability to the markets.
Granted and not granted that the way of rescue tools is the correct way out of the crisis. Frank Schäffler, a libertarian MP elected from the ranks of the FDP, Mrs. Merkel's allied party, has some doubts. For a year and a half he has been waging a merciless struggle against German aid to peripheral countries. He is doing it alone against the same leaders of his party. In recent months he too managed to initiate a referendum of the members of his party (Mitgliederentscheid) to reject the ESM, on which the Bundestag will vote in January. If the outcome, which will be communicated on 17 December next, should be favorable to him, the yellow-black coalition would be at the end of the line. Schäffler calls for "risk" and "responsibility" to go hand in hand again and he is therefore not afraid to talk about haircuts and insolvency. Strengthened by public opinion against subsidizing the rest of Europe and the official support of 54 leading German economists as well as the League of Taxpayers (Bund der Steuerzahler), Schäffler exploits the difficult moment the FDP is going through to give the definitive shoulder to its tops. So far 15.000 registered members have voted, the quorum for the consultation to be valid is set at 21.500. The voices coming from Paris who would like to see the prerogatives of the ESM watered down could ultimately strengthen Schäffler and the small cadre of rebels who follow him.
