German coalition uncertain on euro rescue fund

[September 06, 2011]  BERLIN (AP) -- Opposition to giving Europe's rescue fund new powers appears to be growing within Chancellor Angela Merkel's coalition, weeks ahead of a key parliamentary vote.

In an indication of growing unrest in the coalition, more than 19 lawmakers refused late Monday to support expanding the powers of the euro440 billion ($638 billion) eurozone rescue fund in an informal vote among caucus members, news agency dapd reported Tuesday.

Merkel's Christian Democrats, along with the Bavaria-only Christian Social Union, and their coalition partners, the Free Democrats, hold a parliamentary majority of 19 votes.

If she fails to garner enough support within her own coalition, before lawmakers vote on Sept. 29, Merkel could be forced to rely upon opposition parties to pass the measures, which were agreed to by eurozone leaders on July 21.

The main thrust of the new measures is to equip the so-called European Financial Stability Facility with new pre-emptive powers, including the ability to buy up distressed government bonds or extending short-term credit lines to countries before they are in full-blown crisis mode.

The Social Democrats have said all along they would support the measures, but following a clear victory over Merkel's party in weekend elections in the chancellor's home state of Mecklenburg-Western Pomerania, they are not offering unconditional support.

"We would like to see a tax on financial transactions, and a mix of investment and cost-cutting measures in the affected countries," the party's general secretary Andrea Nahles told the Passauer Neue Presse.

Uncertainty over Europe's ability to deal with its debt crisis has been one of the main reasons behind the turbulence in financial markets over the past month or so. On Monday, Germany's DAX slumped a massive 5.3 percent for example.

Speaking in parliament Tuesday, Finance Minister Wolfgang Schaeuble called on profligate nations in the eurozone to rein in their spending and balance their budgets.

"Without energetic reforms, every form of assistance would be aimless," Schaeuble warned.

A further complication ahead of the parliamentary vote later this month is a pair of rulings from the nation's highest court that involve the eurozone rescue measures.

Judges are to decide Wednesday what role parliament should play in future eurozone crisis management, as well as whether the 2010 Greek bailout was legal.

Although the decision does not directly address the current measures to be voted on, it could have an impact on how lawmakers view the government's handling of the financial crisis.

[Associated Press; By MELISSA EDDY]

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