German parliament passes expanded euro fund

[September 29, 2011]  BERLIN (AP) -- German lawmakers have cleared the way for an expansion of the size and powers of the eurozone bailout fund, in a major step toward tackling the bloc's sprawling sovereign debt crisis.

A clear majority of lawmakers in Germany's lower house of parliament voted Thursday in favor of expanding the fund's capacities in a vote that was also seen as a test of Chancellor Angela Merkel's center-right coalition.

The vote means Germany will be guaranteeing loans worth euro211 billion to the so-called European Financial Stability Facility, or EFSF, bailout fund.

The measure will be put to the upper house of parliament on Friday, where it is expected to pass.

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BERLIN (AP) -- German lawmakers are expected to approve new powers Thursday for the eurozone bailout fund in a major step toward tackling the bloc's sprawling sovereign debt crisis.

Passage in the lower house appeared certain, thanks to support of opposition lawmakers, but it was proceeded by a lively debate that laid bare how divided Germans remain over their role as Europe's economic motor and delayed the actual vote.

Germany is the biggest economy among the 17-countries that use the euro currency and has to contribute more than others to boosting the firepower of the bailout fund, the so-called European Financial Stability Facility, or EFSF. If passed, Germany will be guaranteeing loans in future to the tune of up to euro211 billion, rather than euro123 billion so far.

The vote has also highlighted tensions in Chancellor Angela Merkel's center-right coalition, which has been strained by members who have balked at the cost of propping up the eurozone's strugglers.

"Today we will make an important contribution to our nation, to Europe and to the stability of the euro," Volker Kauder, the parliamentary leader of Merkel's bloc, said in opening remarks on the debate.

Yet Frank Schaeffler, a dissenting member of Merkel's junior partner, the Free Democrats, argued that bailout measures have worsened Greece's economic situation.

"Despite all arguments, the first bailout did not make the situation for Greece better, but worse," Schaeffler said. "Expanding the fund will make the situation even worse."

Vice Chancellor Philipp Roesler, also a Free Democrat, argued in favor of the measure as a chance to restore confidence in Europe.

The lawmakers -- under close scrutiny from jittery markets -- are voting on European leaders' decision in July to increase the effective lending capacity of the fund to euro440 billion ($595 billion) and give it new powers, such as buying the bonds of shaky countries or lending money to governments before they get into a full-blown crisis.

Though German approval appears assured, markets remain in a fairly jittery mood over Europe's handling of its debt crisis. Shares in Europe have opened modestly lower Thursday.

"We are in an exceptionally difficult situation, because the financial markets remain extremely uncertain," Finance Minister Wolfgang Schaeuble told lawmakers in his appeal to support the measures. "For that reason it is smart for us to take our responsibility seriously."

Though Merkel described the euro as "our common future" and said approving the beefed-up bailout fund was "of the very, very greatest significance," she has not mustered the support of all member of her governing coalition.

Discussions went deep into the night in an attempt to win support of as many ruling lawmakers as possible, in an effort to secure a solid enough majority so that the government doesn't need the opposition's votes to pass the measure. At least a small group of lawmakers plan to vote against.

Opposition leaders have said that if Merkel's coalition has to rely on their votes, it would be a sign that her strife-prone and increasingly unpopular government is finished.

On Wednesday, Finland voted in favor of expanding the fund's powers despite earlier threats to pull out of a rescue plan for Greece.

The fund expansion has to be ratified by all 17 eurozone nations to take force.

[Associated Press]

Geir Moulson contributed to this story.

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