Markus Schreiber, Associated Press
BERLIN — Germany kept alive hopes that the 17-nation euro currency can survive the sprawling debt crisis when lawmakers in Europe's largest economy on Thursday voted overwhelming in favor of expanding the powers of the eurozone's bailout fund.
The vote strengthened Angela Merkel's center-right coalition, which had struggled to win support from a bloc of rebellious members, and could bolster her ability to negotiate new European crisis measures.
While many investors and experts believe new steps will be required in Europe, such as letting Greece write off more of its debt pile, Germany's approval of the fund's new powers and scope was necessary to avoid a new bout of massive market turmoil.
"The support of the Bundestag is an important step for stabilizing the eurozone," Michael Kemmer, head of Germany's Bank Federation, told the news agency dapd. "With that, they have set a course that leads out of the debt crisis."
The €440 billion ($600 billion) fund will be able to buy government bonds and lend money to banks and governments before they are in a full-blown crisis, making Europe's response to market jitters more rapid and pre-emptive.
Germany, which pays the lion's share of European bailouts, became the 13th member of the eurozone to support the expansion of the rescue fund, the so-called European Financial Stability Facility, or EFSF. Cyprus also passed the proposed expansion on Thursday.
Austria's parliament is widely expected to pass the measure on Friday, the same day Germany's upper house of parliament is set to finalize Thursday's vote, while the Netherlands is expected to approve it in the first week of October.
The biggest remaining hurdle is the final country to vote — Slovakia — where the government will not have enough support to pass it if the leader of the junior coalition Freedom and Solidarity party follows through with threats to vote against the fund's expansion. Its parliament is to vote later in October.
In Berlin, 523 lawmakers in parliament, the Bundestag, voted in favor of expanding German participation to guarantee loans of up to €211 billion, compared with €123 billion so far. Eighty-five voted against it and three abstained.
"It was a strong statement of Angela Merkel's position. She has the backing and the support of the coalition and she is able to negotiate on the European level," Peter Altmeier, the parliamentary whip for Merkel's Christian Democrats, said after the tally was announced.
Markets appeared calmer even before Thursday's votes, following weeks of turbulence triggered by uncertainty over Germany's position on the fund. The euro also traded slightly higher.
"The overwhelming majority in the Bundestag is a good sign and will hopefully mark a step change in German commitment to bringing the spiraling crisis under control," said Sony Kapoor of the Re-Define economic policy think tank.
The lingering problem, however, is that investors are resigned to the fact that Greece will have to default — that is, impose tougher losses on its bondholders.
Greece was saved from default by an initial €110 billion ($150 billion) bailout in May last year before the EFSF was established to help any other countries in trouble. A planned second rescue package for Greece this year includes a voluntary participation by private bondholders, who agreed to write off about 20 percent on their Greek debt holdings.
Many experts say those writedowns should be closer to 50 percent. The debate among European leaders now is whether to allow such a move under controlled conditions, providing help to banks that may take heavy losses on Greek bonds they hold.
- From 0.3 to 81.1: What percentage of each...
- Vietnam says it may have found missing jet's...
- Jet may have turned; suspicious passengers...
- FBI to investigate disappearance of a...
- Rutgers faculty council pushes for school to...
- Themes of faith, freedom echo at CPAC in...
- Terrorist attack? Mechanical failure? Reasons...
- Early auditions for 2016 Republican...
- Obama administration allows 2-year... 28
- Putin: Russia has right to use force in... 22
- Disney ending funding to Boy Scouts in... 21
- Half of millennials more likely to lean... 19
- Early auditions for 2016 Republican... 17
- Rutgers faculty council pushes for... 13
- Former IRS official Lois Lerner again... 11
- New Ukraine prime minister: Crimea will... 9