Translated from German: Deutscher Bundestag Translation Department

Next week, the EU's financial assistance for Ireland is set to be finalised, following intense wrangling about how to proceed in this case. The aim is clear: the Irish state is to receive support to allow it to bail out the Irish banks, which bet the farm during the property bubble. At stake are, above all, the profits of other European financial groups – with German companies ranking alongside those from the UK as having significant exposure to Ireland, reportedly amounting to up to 150 billion euros. It was unclear how a bailout of this kind was to be executed, however. After all, the EU financial stabilisation package was primarily designed to rescue states, not financial institutions, from bankruptcy. Yet Ireland is not currently insolvent. The crisis has only even come to a head in this way primarily because the rate of interest has shot up following Federal Chancellor Angela Merkel's talk of insolvency, to an extent which has made loans ever more expensive for struggling states such as Ireland. And so the EU, the European Central Bank and the International Monetary Fund have for days been trying to force Ireland to agree to the rescue package – and to agree on conditions.

Difficult though the negotiations are, on one issue consensus reigns: the bailout of the European banks is certainly to be paid for by European taxpayers. Jean-Claude Trichet, President of the European Central Bank, was among those who stepped forward to ensure there were no doubts about what is at stake. He called for the Stability Pact to be tightened in view of the Irish crisis. This is of course absurd, because Ireland has not breached the deficit rules in the past – unlike Germany, for example. Ireland's plight is due not to overly lax deficit rules, but to a credit-fuelled construction boom lasting years, which the banks enabled with an endless supply of loans, many of which have now turned bad. This can't have escaped Monsieur Trichet's notice. His comments were most likely intended to dictate the way forward. The Stability Pact is always a tried and tested means of tightening the screws on public spending. In general, however, it doesn't result in lower levels of debt.

Instead of aggravating the debt crisis further by following Trichet's proposal, alternative measures are needed. The ECB must at last begin issuing direct loans to states, to put an end to the use of ECB funds to subsidise bank profits. In addition, it is becoming ever clearer that fiddling with the symptoms isn't healing the underlying disease of the financial crisis. It is therefore necessary to now finally consider a significant 'haircut' in the entire eurozone. The EU must not become a organisation devoted to rescuing banks, as envisaged by Jean-Claude Trichet, but must focus on policy-making in the interests of the people living in Europe.