© Reuters. FILE PHOTO: The European Union and German nation flags are pictured before a debate on the consequences of the Brexit vote at the lower house of parliament Bundestag in Berlin, Germany, June 28, 2016. REUTERS/Fabrizio Bensch
BERLIN (Reuters) – A planned reform of the euro zone’s bailout fund poses substantial risks for Germany’s state budget, its federal audit office says in a confidential report, broadcaster ZDF reported on Sunday. Euro zone finance ministers agreed in November to widen the responsibilities of the fund, known as the European Stability Mechanism (ESM), to strengthen the resilience of the common currency area amid worries that the COVID-19 pandemic increased risks of future economic trouble. The changes will allow the ESM to lend to the euro zone’s bank resolution fund to wind down failing banks if, in a banking crisis, the fund runs out of its own money. That would result in “banking risks being communalised at the public funds level,” ZDF quoted the report as saying, which means that the audit office is concerned that the state would have to pay in cases of banking crisis.
The German parliament’s budget committee will hear ESM chief Klaus Regling, Elke Koenig, who chairs resolution fund and the Vice-President of Germany’s central bank Claudia Buch in a public hearing on Monday. The audit office did not immediately reply to a request for comment.
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.