Germany Resists Proposals to Aid Spain’s Banks

European Union and French officials squared off against Germany on Monday over how best to help Spain’s ailing banks, drawing lines in the debate over the latest challenge to the euro zone, the International Herald Tribune reported. Olli Rehn, the European commissioner for economic and monetary affairs, and Pierre Moscovici, the French finance minister, offered cautious endorsement at a news conference in Brussels for the idea of letting Europe’s bailout funds inject money directly into troubled banks. Doing so could allow a de facto rescue of the Spanish banking industry without requiring the Spanish government to hew to the budgetary strictures of a Greek-style bailout — something Madrid has indicated it wants to avoid. But Germany has opposed the idea of tapping the new bailout fund, the €500 billion, or $624.5 billion, European Stability Mechanism, to inject money directly into any country’s banks. The Bundesbank, the German central bank, argues that the bailout fund has no capacity or expertise to manage bank bailouts, which would probably include restructuring of crippled lenders. German officials have made clear that they want any bailout money to flow through governments, with strict conditions, until there is a European bank supervisor with sufficient staff and legal authority in place. But Chancellor Angela Merkel of Germany suggested that Germany may be willing to give ground on that stance as she headed into a meeting Monday evening in Berlin with José Manuel Barroso, president of the European Commission, to discuss ways out of the euro crisis. "The world wants to know how we expect the political union to complement the currency union," she told a news conference. "We have to find an answer in the foreseeable future." Read more. (Subscription required.)