In Merkel Test, Bundestag Backs Expansion Of Eurozone Rescue Fund

(RFE/RL) — Germany’s Bundestag has voted to support an agreement reached by EU leaders in July that would expand the powers of the European Financial Stability Facility, the European Union’s emergency aid fund for eurozone countries that are in financial distress.

With support from both the government and the opposition, the lower house of parliament in Berlin voted 523 to 85 in favor of legislation that supports the July agreement. There were three abstentions.

The measure is expected to easily pass in Germany’s upper house of parliament, the Bundesrat, where it is due for a vote on September 30.

Political analysts were closely watching the lower-house vote to see whether German Chancellor Angela Merkel got enough votes from her own coalition to silence a rebellion by her allies about funding bailouts of countries like Greece.

A breakdown of the voting shows that after a night of intense lobbying, 315 of Merkel’s 330 coalition members voted in favor of the measure — enough to have ensured its passage even without opposition support.

Success or failure for Merkel was being measured by whether she was able to muster at least 311 lawmakers from her own coalition to join the “yes” vote — the same number of votes she would need to win a parliamentary vote of confidence if one were to be held.

Failure to get support from at least 311 of Merkel’s coalition members also was seen as a threat that could have stalled implementation of the changes for months and hamper the next stages of the euro rescue plan.

The Bundestag backing raises Germany’s guarantee to the EFSF from 123 billion euros to 211 billion euros. But in order to comply with Germany’s constitution, there are clauses in the legislation that prevent the German government from approving future rescue fund payouts or any changes to the fund’s guidelines.

Instead, fund disbursements, or changes to the fund’s guidelines, require approval from Germany’s parliament — or in urgent cases, approval by the parliamentary budget committee.

Merkel was among the EU leaders who agreed in July to a plan that would give more powers to the 440 billion-euro EFSF rescue fund — including the authority to buy government bonds, to bail out troubled banks, and to lend funds to cash-strapped governments quickly before their fiscal problems spiral into full-blown crises.

With Germany’s approval, the agreement will have parliamentary backing in 10 of the 17 eurozone countries that must support the plan before it can be implemented.

Amadeu Altafaj, spokesman for EU Economy Commissioner Olli Rehn, said in Brussels after the Bundestag vote that the EU executive now expects all 17 eurozone countries to approve the expanded powers for the bailout fund by mid-October.

On September 28, European Commission President Jose Manuel Barroso told the European Parliament in his annual State of the Union address to that closer economic integration is needed within the eurozone to save the common currency from collapse.

“We are confronted with the negative effects of an ongoing global reassessment of risks,” Barroso said. “It is, therefore, our responsibility to rebuild confidence and trust in the euro and our union as a whole. And we can do this by showing that we are able to take all the decisions needed to run a common currency and an integrated economy in a competitive, inclusive, and resource-efficient way.”

The July agreement by EU leaders to expand the EFSF got a boost on September 28 when Finland’s parliament approved the measures. That vote was significant because Finland, locked in a dispute over its demands for collateral in exchange for Greek loan guarantees, had been seen as a potential stumbling block to implementing the amended EFSF.

Meanwhile, auditors from the EU, the European Central Bank and the International Monetary Fund (IMF) were meeting officials in Athens on September 29 to assess whether the Greek government has implemented enough of its promised austerity measures to receive the next tranche of a bailout aimed at helping Greece avoid default on its debt obligations.

Greek public-sector workers were holding more strikes on Septeber 29 to protest austerity measures.

written by Ron Synovitz in Prague based on agency reports