German lawmakers win full say on EFSF

Reuters

By Stephen Brown and Sarah Marsh

Chancellor Angela Merkel

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The new vote comes just one month after Germany's Bundestag (lower of house of parliament) approved greater powers for the euro zone rescue fund, and should pass without problems, but it risks delaying Europe's response to the debt crisis at a crucial juncture.

Merkel cannot agree to changes to the 440 billion euro European Financial Stability Facility (EFSF) without approval at least from the Bundestag's budget committee, as a result of a constitutional court decision last month.

However, Merkel's Christian Democrats' (CDU) floor leader Volker Kauder demanded a full debate and vote by the German Bundestag (lower house of parliament) rather than just a vote by the 41-member budget committee, which might have been quicker and less risky while still meeting new rules on consulting MPs.

"On such important questions it's good if parliament gives the chancellor broad backing for her negotiations," said Kauder regarding the vote due early Wednesday, before Merkel returns to Brussels for a second, decisive euro summit.

Major opposition parties the Social Democrats (SPD) and the Greens welcomed the vote, and indicated they would back proposals aimed at countering the debt crisis. But they stopped short of confirming they would vote "yes," saying they needed to see documents detailing the proposals first.

Juergen Trittin, parliamentary co-leader of the opposition Greens, said Merkel had told them the haircut for Greece would be "above 50 and below 60" percent and that leveraging of the European Financial Stability Facility (EFSF) could be above 1 trillion euros.

Merkel will address parliament before the vote and before returning to Brussels for what should be a more decisive summit on boosting the firepower of the EFSF, raising the contribution of private banks to Greece's rescue, and getting European banks to increase their own capital to prevent contagion.

"We are still not able to talk of concrete texts... Therefore I am not in a position to talk conclusively or to tell you how the SPD will vote this week in parliament," he told reporters.

BATTLING MERKEL

The Chancellor's supporters praised her for getting France to drop demands to use the European Central Bank to leverage euro crisis funds, and there was broader support also for a leader often accused of dithering.

"The chancellor must stick to her guns -- in the interests of Germany and of Europe," said the newspaper.

"The chancellor negotiated well in Brussels. She showed strong leadership," Altmaier told reporters.

"The French president says he sees things just like Angela and I see that as progress," said the conservative premier of Hesse state, Volker Bouffier. "Germany and France must take the same line as the most important two countries."

Sarkozy ceded to German insistence at Sunday's summit that the ECB should not be used to fight the crisis, which poses an especially big threat to French banks and France's triple-A sovereign debt rating.

Instead, an EU paper obtained by Reuters suggested the euro zone would take up Germany's proposal of boosting the EFSF's firepower by using it as a form of debt insurance, combined with seeking help from emerging market economies like China and Brazil via a special purpose investment vehicle (SPIV) to prop up the euro zone's secondary bond market.

Merkel's spokesman Steffen Seibert said these two options, which had no ECB involvement, were the only two left on the table for leveraging the EFSF and would be discussed by the summit Wednesday. He said they were not mutually exclusive.

(Additional reporting by Annika Breidthardt, Gernot Heller and Oliver Denzel; Writing by Stephen Brown and Alexandra Hudson; Editing by Catherine Evans)

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