German Chancellor Angela Merkel’s cabinet has approved measures that paves the way for new powers for the euro zone bail out fund.The move has been met with sharp criticism however, and members of Merkel’s centre-right coalition have threatened to vote against the move, according to Reuters.
New proposals for the EFSF include the ability to buy government bonds and give ‘precautionary’ credit lines to countries.
Germany’s deputy finance minister Jorg Asmussen said that the €440 billion European Financial Stability Facility (EFSF) was big enough (via CNBC):
“When we come to the size, we are building up an effective lending capacity of 440 billion euros. On top of this you have IMF money available. So I think the size of the EFSF is enough.”
If enough conservatives oppose the move, Merkel will have to call on opposition parties to pass the legislation. The number of dissenters is reported to be between 12 – 23, and Merkel could afford to lose no more than 19 votes to prevent her from relying on opposition parties.
But senior conservatives looking to pacify those that believed the parliament would have little sway over the funds, have come up with a plan to consult the Bundestag lower house of parliament, on use of the bailout fund.
New powers for the EFSF are centered on allowing it react quickly in a crisis. So, the new plan would inform the Bundestag budget committee of smaller EFSF decisions but would consult with it for others. With these efforts, and with opposition Social Democrats and Greens indicating their support, the bill is expected to pass. But if Merkel loses the favour of the majority it would throw her government into disarray.
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