September 29, 2011German Parliament Expands Eurozone Rescue Fund
A majority of German lawmakers voted to approve an EU plan (DeutscheWelle) to increase the lending capacity of the eurozone's temporary bailout mechanism, the European Financial Stability Facility (EFSF), while expanding its powers to buy up government bonds on the secondary market. It was a political coup for German Chancellor Angela Merkel, who has faced significant dissent within her center-right coalition government over whether to provide a new bailout to indebted Greece.
The Finnish parliament (Guardian) a hotbed of euro skepticism--also approved the measure. Austria's parliament agreed to support EFSF expansion and is expected to ratify the agreement (WSJ) tomorrow.
Six other European countries must still approve the measure before it can take effect. Slovakia, which will vote on the plan in mid- to late October, is considered the biggest obstacle (Bloomberg) to its enactment, though lawmakers indicated a compromise may be in sight.
Eurozone leaders hope that ratification of the expanded rescue mechanism will pave the way for a second Greek bailout that was agreed upon by EU leaders in July.
Even as the Greek government lobbies eurozone leaders for a second bailout, the Greek sovereign debt crisis has become unsustainable and a default is all but inevitable. Most economists think the question now is how to make the process orderly.
The euro is proving it can transform economies in a way that corresponds to shared European values, writes former European Commissioner Mario Monti in the Financial Times.
With fewer conservative renegades than feared, Merkel can breathe a sigh of relief. But with more difficult decisions approaching, the respite may not last, says Der Spiegel.
A workable deal to salvage the euro was precluded by disparate electorates being promised contradictory things, says the Guardian.
