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German Parliament Approves Expansion of EFSF

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German Chancellor Angela Merkel's ruling coalition closed ranks Thursday in passing a bill to reform the euro-zone bailout fund without having to rely on votes from opposition parties, according to parliament voting results.


A total of 315 lawmakers from Ms. Merkel's coalition of Christian Democrats, Bavarian Christian Social Union and the pro-business Free Democrats voted in favor of the bill to expand and reform the European Financial Stability Facility. Thirteen coalition lawmakers voted against the bill and two abstained.


The bill requires an increase of German guarantees for the EFSF fund to €211 billion, from €123 billion. The German bill also includes a resolution that requires Ms. Merkel to obtain approval from the German parliament for any changes to the EFSF, and the creation of new bailout instruments or any new bailout funds. The de facto veto right of parliament adds another layer of bureaucracy to the process and could tie Ms. Merkel's hands in decisions over future bailouts, said analysts.


Yet even as parliament passed the EFSF bill, debate also moved on to the future. Peer Steinbrueck, a leading Social Democrat and possible challenger to Ms. Merkel in 2013, said that Ms. Merkel has failed to be transparent about the next step in resolving Greece's debt crisis. "We will not be able to avoid a haircut that includes bondholders," he said.


Ms. Merkel has faced more opposition to the EFSF bill within her own coalition than from the opposition parties in parliament. Over the past few days, however, the ranks of the euro rebels thinned.


Source: WSJ

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