Uproar in Germany over new euro plan

ERMANY’s conservative press has accused the European Central Bank of giving indebted eurozone states a “blank cheque” by agreeing to buy their bonds. Some pro-government MPs are threatening legal action to stop the purchases.

ECB president Mario Draghi unveiled a plan on Thursday for potentially unlimited purchases of bonds of up to three years maturity of countries seeking European bailouts and fulfilling strict policy conditions. Germany’s central bank chief was the sole dissenting voice.

Chancellor Angela Merkel gave tacit support for the plan, saying it bought time for vulnerable states like Spain and Italy to implement tough reforms. But the outcry from a small, vocal eurosceptic minority of her own centre-right MPs and influential conservative media underlined her risks as the euro crisis builds ahead of a general election a year from now.

“Blank cheque for indebted states,” blared top-selling Bild tabloid, a critic of bailouts for Greece and other struggling eurozone nations. It also said the ECB move could leave the euro “kaput ”.

“Draghi sets off Germany’s alarm bell,” trumpeted conservative daily Die Welt.

An opinion poll issued on Thursday showed nearly one in two Germans has little or no confidence in Italian Draghi.

Many German conservatives share the fear of Jens Weidmann, head of the Bundesbank, that the bond-buying plans violate a taboo on financing deficits, remove pressure on governments to reform and will eventually stoke inflation.

Several MPs vowed legal action to block the plans.

“We should consider making legal checks on whether the ECB has hugely overstepped its mandate. I am convinced this is the case,” said Klaus-Peter Willsch, a leading eurosceptic member of Merkel ’ s Christian Democrats (CDU).

“As the largest credit nation in the whole game, Germany should have a right of veto (in the ECB),” he said.

Weidmann was isolated in Thursday’s meeting of the ECB governing council, where mighty Germany, with 82 million people and Europe’s biggest economy, has just one vote like tiny Malta.

The Bundesbank said the decision was “tantamount to financing governments by printing banknotes”.

Investors cheered the ECB rescue plan, with the euro and stocks rising worldwide and the borrowing costs of Spain and Italy tumbling.

Die Welt headlined the market reaction bitterly: “Financial markets cheer the death of the Bundesbank.”

Frank Schaeffler of Merkel’s junior coalition partner the Free Democrats said Germany should file a lawsuit with the European Court of Justice, saying the ECB was in danger of turning into a “bad bank for all the junk debt of Europe”.

The rank-and-file of Merkel’s coalition still back her stance of helping struggling countries on condition that take tough steps to put their public finances in order and improve competitiveness. “As long as there is conditionality, it is okay,” said deputy CDU floor leader Michael Fuchs.

In Stockholm on Friday, Finance Min- ister Wolfgang Schaeuble contradicted Weidmann, saying the bond buying plan was not the start of monetary financing of sovereign debt.

Merkel ’ s spokesman, Steffen Seibert, said the ECB acted independently and within the framework of its man- date in taking its decisions.

But MPs are nervously eyeing opinion polls that show rising public opposition to bailouts in Germany, where fear of hyper-inflation is ingrained.

A poll on Spiegel Online on Friday showed 54% of Germans want their constitutional court to block the eurozone’s permanent rescue fund, the European Stability Mechanism (ESM), and 25% want it approved. Legal experts expect the court to approve the ESM on Wednesday, but limit Berlin’s future flexibility. — Reuters TRADER Glencore has raised its offer for miner Xstrata in a dramatic 11th-hour effort to rescue one of the sector’s largest ever deals from collapse after opposition from rival shareholder Qatar.

Glencore’s chief executive Ivan Glasenberg, helped by a late intervention from former British prime minister Tony Blair, lived up to his reputation as an unpredictable dealmaker, with overnight talks with Qatar and dawn telephone calls on Friday that put the now $36billion deal back on the table, sources said.

Glencore, which has a 34% stake in Xstrata already, is proposing an offer of 3.05 new shares for every Xstrata share it does not already own, up from 2.8, a statement issued by Xstrata said. Qatar demanded a ratio of 3.25 in June, but in recent days sources involved in the deal had said the Gulf state ’ s sovereign wealth fund could settle for a compromise.

The new proposal, however, would place Glasenberg as chief executive of the combined group instead of Xstrata boss Mick Davis, who would have taken the role under the original deal.

A statement by Xstrata also said Glencore could consider changing the offer’s structure, from a complex arrangement that requires 75% approval without Glencore, to a straightforward takeover requiring a simple majority.

“We ’ ve always thought that there was a reasonably good chance that Glencore would bump the offer modestly, and we believe that Qatar will probably accept this 3,05,” said Brewin Dolphin analyst Nik Stanojevic.

Glencore’s bid had been heading for the rocks after Xstrata ’ s second-largest shareholder, Qatar, with 12%, said it would vote down the deal unless it was improved.

Industry sources and those involved in the bid had not ruled out a last-minute handbrake turn from Glencore, but Glencore’s chairman Simon Murray shocked shareholders gathered in Zug, Switzerland, for a vote on the deal, by hurriedly cancelling the general meeting, citing “overnight developments ”.

Less than two hours later, Xstrata postponed its own meeting and announced the revised terms.

It is unclear if Xstrata’s board would accept that change, which would allow Glencore to buy shares offered in a tender, as its non-executives have fought to ensure Glencore would either get full control of the miner or remain at 34%. — Reuters