Goldman's Take On The Imminent German EFSF Vote

Here is Goldman's Dirk Schumacher chiming in with his views on the German EFSF vote expected in 50 minutes, although which is now likely to take place at noon central European due to lengthy monologues in the German parliament.

 Bundestag to vote on EFSF expansion this morning. The vote will take place around 11:00 CET. After a test vote among coalition MPs it now seems that Chancellor Merkel can rely on a majority from within her own ranks. This would be an important signal, showing that Merkel indeed does have the necessary support for her course among coalition MPs.

Finance minister Schäuble stressed again this morning in a radio interview that the "EFSF will be used as efficiently as possible". When asked whether this could imply leveraging up the guarantees provided to the EFSF, Schäuble said "what the future brings no one can say". However, he also stressed that any further expansion would need the approval of the Bundestag.

The head of the CSU, at the same time, warned against any further increase of the EFSF. Speaking in an interview with Süddeutsche Zeitung Seehofer said that "up until here and no further" and that "the end is reached once the credit rating of Germany would suffer".

SPD fiscal expert Schneider demanded that finance minister Schäuble should "give account" in the Bundestag if the increased EFSF would still be insufficient in size. Schneider referred to the IMF's latest Financial Stability Report saying that EU banks would need €300 billion in additional capital due to the debt crisis. Note, however, that the IMF says that the calculations in the stability report are not a stress test but rather measure "spillovers" from peripheral countries to the EU banking system and that "determining capital needs would call for a fully fledged stress test". In fact, reading the stability report it is not clear to us how to interpret this €300 billion figure.