Battle Brews in Germany Over Parliamentary Approval of EFSF Funding; Italian Prime Minister Vows to Leave 'Shitty' Italy in Recorded Conversation

Mish’s Global Economic Analysis

Angela Merkel wants quick passage of EFSF changes and once in place wants to make bailouts without further parliamentary approval. This sounds much like the disastrous open-ended slush-fund bailout proposals we saw in the US at the height of the crisis. Merkel warns that parliamentary approval would slow things down. 

What's wrong with that? Indeed it might be better if things slowed to a halt, otherwise taxpayers are going to get screwed again. Der Spiegel does not see it that way. 

Please consider Parliamentary Influence over Euro Bailouts 'Naive' 

The German parliament is calling for increased authority in euro-zone bailout packages established by the EFSF backstop fund. But that could ultimately slow things down to a dangerous degree, economists warn. German commentators on Thursday make a plea for democracy. 

Germany's parliament feels ignored. Until now, the Bundestag has had very little influence on decisions made by Chancellor Angela Merkel and her government regarding bailout packages for heavily indebted euro-zone states. But with expanded powers having been granted to the euro backstop fund -- known as the European Financial Security Facility or EFSF -- at a European Union summit in July, German parliamentarians also want a greater say. 

On Wednesday, Merkel's cabinet agreed on the law necessary to expand the EFSF , a change which must be agreed to by all euro-zone governments. But the question as to how much influence the German Bundestag might ultimately have over EFSF bailouts was left unanswered, pending ongoing negotiations. Given the threat of a conservative revolt , Merkel has proven open to a compromise. Too many parliamentary defections from her Christian Democrats (CDU) and its Bavarian sister party, the Christian Social Union, in the late September vote could topple her government. 

But on Thursday, several struck a more cautionary note, including German Finance Minister Wolfgang Schäuble, a leading member of the CDU. The EFSF , he said, must be able to "act quickly." As such, he said that the parliament must act responsibly with any influence it is granted. 

Several economists went even further. "In a situation of market panic, the EFSF has to act quickly," Holger Schmieding, chief economist of Berenberg Bank, told the Financial Times Deutschland. "It could happen overnight or on a weekend."

German taxpayer liability in the new ESFS proposal is €211 billion, nearly the national budget. And Merkel wants that at her disposal with no interference from parliament. 

Quite frankly it is nuts. Imagine Obama asking for a $1 trillion slush fund at his disposal to bail out other countries. The whole country would think he was mad. 

Italian Prime Minister Berlusconi is Finished 

If you did not know it before, it is crystal clear now, Italian Prime Minister Berlusconi has had it. The Guardian reports Berlusconi vows to leave 'shitty' Italy in conversation recorded by police 

In a sign of his frustration at the investigations into his alleged crimes and misdemeanours, Silvio Berlusconi vowed in July to leave Italy, which he described as a "shitty country" that "sickened" him. 

The Italian prime minister's astonishing remarks are contained in the transcript of a telephone conversation secretly recorded by police investigating claims he was being blackmailed about his sex life. 

At dawn on Thursday, police swooped on a flat near Via Veneto – one of Rome's most expensive streets – to arrest Giampaolo Tarantini, a central figure in a scandal that threatened to bring down Berlusconi two years ago. 

Tarantini's wife, Angela Devenuto, was also taken into custody and a search launched for a third person. The arrest warrant shows that the three are accused of extorting at least €500,000 (£440,000) "as well as other benefits of economic significance". Berlusconi has admitted paying the couple, but said he did so voluntarily. 

The sex scandal at the origin of the latest allegations was one of several involving Berlusconi in the past three years. He is on trial in Milan charged with paying an underage prostitute and then using his position to cover up the alleged offence, but that case is not related to the one that has now come back to haunt him. 

Details of the latest investigation were leaked last month in a news magazine belonging to Berlusconi. The magazine, Panorama, claimed the prosecutors believed Tarantini was being paid to stop him contradicting the prime minister's claim that he was unaware that some of the women who visited his home were prostitutes. 

But Panorama said Tarantini had repeatedly confirmed in wiretapped conversations that Berlusconi was indeed oblivious of the payments the women were receiving. Italy's prime minister, who turns 75 later this month, has made much over the years of his talents as a playboy and has insisted he would never pay for sex.

These stories of internal bickering show the fragile nature of the Eurozone bailout proposals. Finland's insistence on collateral is another piece of the fragile puzzle. 

This whole mess seems like it is attached together with rubber-bands, paper clips, and Elmer's glue. I fail to see how it can possibly last. 

Mike "Mish" Shedlock