German upper house wants billions before backing ESM: Seehofer

BERLIN Sat Jun 23, 2012 11:31am EDT

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BERLIN (Reuters) - German parliament's upper house wants financial concessions worth billions of euros to the country's 16 federal states before backing the permanent bailout scheme for the euro zone and the fiscal pact next week, its president said.

Bavaria state premier Horst Seehofer, who holds the rotating presidency of the upper house, also told the Bild am Sonntag newspaper: "I am very much in favour of the fiscal pact but we are going to have a difficult situation if they stay stubborn in Berlin", according to an advance released on Saturday.

The lower and upper houses of parliament, the Bundestag and Bundesrat, were set to vote in separate sessions on the European Stability Mechanism (ESM) and the so-called "fiscal compact" on Friday, June 29.

Chancellor Angela Merkel needs a two thirds majority in both houses for the fiscal pact. The opposition Social Democrats (SPD) and Greens have said they would support the measure and leaders of those two centre-left parties told Reuters on Saturday they would back it.

But Seehofer, who is also the leader of the Christian Social Union (CSU) that is a sister party to Merkel's Christian Democrats (CDU) said the states and communities needed assurances of more federal funding first, especially for services for the handicapped.

Seehofer also wants the federal government to raise funding for the transport ministry's budget by 1.5 billion euros ($1.9 billion) for projects such as a train tunnel in Munich, the Bavarian capital. The transport ministry is led by another CSU leader, Peter Ramsauer.

"This relief for the communities is necessary so that the debt brake will function," he said. "We are expecting constructive answers from the federal government. To just say 'We are not giving you anything, you have to approve the fiscal pact the way it is' is not going to work out."

Another conservative state premier, Volker Bouffier of Hesse, said in an interview with the Frankfurter Allgemeine Zeitung he expected the states to reach an agreement with the federal government at a meeting in Berlin on Sunday.

"At the end of the day the federal government is going to have to show a bit of generosity towards the communities," Bouffier said.

On Thursday, the government and opposition reached a deal on how to stimulate growth in Europe that will allow the lower house to approve the euro zone's permanent bailout scheme.

The deal on growth gave Merkel the support of the SPD and Greens in parliament on June 29 to approve her fiscal compact for budget discipline in Europe, as well as the ESM.

While the ESM bailout fund was meant to come into effect on July 1, draft conclusions seen by Reuters on Thursday for next week's summit of EU leaders showed they now aimed to make it operational on July 9 due to delays in the ratification process in several euro zone countries, not only in Germany.

Full ratification also requires the signature of German President Joachim Gauck and a nod from the constitutional court in Karlsruhe.

On Saturday, SPD chairman Sigmar Gabriel told Reuters the government had mostly fulfilled the demands of the opposition.

($1 = 0.7977 euro)

(Additional reporting by Matthias Sobolewski and Holger Hansen; Editing by Dan Lalor)

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