German coalition lawmakers to propose compromise on EFSF

BERLIN (Reuters) - Lawmakers from Chancellor Angela Merkel's coalition will make a proposal this week to persuade rebel colleagues to back measures to bolster the powers of the euro zone bailout fund, a senior conservative lawmaker said on Monday.

Some 23 lawmakers from Merkel's own coalition have said they would not back the reforms of the European Financial Stability Facility (EFSF) in a vote in the Bundestag (lower house of parliament) next month, German media reported at the weekend.

Yet Norbert Barthle, the chief budget expert of Merkel's conservatives, said he thought the number of critical voices was just half that.

He was confident the coalition would muster enough support for a parliamentary majority without recourse to opposition votes -- as long as it was willing to compromise.

Last month, euro zone leaders agreed in principle on a second bailout of Greece that would include a further 109 billion euros ($157 billion) from the EFSF and the International Monetary Fund through mid-2014.

They also agreed to give the bailout fund extra powers under specified conditions, such as a potential role in helping to recapitalize banks, buying government bonds and providing precautionary credit lines to countries.

According to an internal parliament document obtained by Reuters, the strengthened EFSF should receive its own decision making powers for new forms of financial aid for countries in crisis -- which conflicts with demands from German MPs.

Germany, the euro bloc's biggest economy, has been reluctant

to make it easier to bail out countries that many Germans see as profligate.

The opposition Social Democrats (SPD) and Greens said they would vote for the measure so its passage is certain. But political analysts warn that if Merkel fails to pass the measure with lawmakers from her own coalition, it could trigger a crisis of confidence and political turmoil.

"If Chancellor Merkel does not manage to get a majority of her own in the euro issue, the logical answer would be new elections," said SPD secretary-general Andrea Nahles.

But Barthle said he would make a proposal offering a compromise in the dispute over the EFSF together with colleagues from the other parties in the ruling center-right coalition.

"We will work out a procedure, on the one hand, that enables the European bailout fund to react quickly enough," Barthle told public broadcaster ARD, while noting that parliament had a right to be consulted fully when dealing with such big sums of money.

"At the end of the day, I believe we will obtain a majority," Barthle said, acknowledging that it would be a "hefty blow to the government" if this were not the case.

There are 620 seats in parliament and Merkel's coalition has 330, while the three opposition parties have 290.

Merkel said on Sunday she was sure the government benches would vote for the new measures, while Finance Minister Wolfgang Schaeuble warned coalition MPs that financial markets may doubt Europe's ability to act if they failed to do so.

Another key conservative MP, Josef Schlarmann, on Monday urged other deputies to vote against the reformed EFSF. He said Merkel had broken promises made to coalition deputies with the agreement at a EU summit meeting in July.

(Reporting By Sarah Marsh; Editing by Ruth Pitchford)