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29 Sep, 2011 08:14

Germany boosts EU bailout fund

The German parliament has backed a controversial plan to strengthen the EU rescue fund. Thursday’s vote in Berlin passed with a large majority.

A clear majority of lawmakers in Germany's Bundestag, the lower house of parliament, voted in favor of enhancing the powers of the European Financial Stability Facility.According to the parliament's deputy speaker, Wolfgang Thierse, 523 lawmakers voted for the bill, with 85 against and only three abstentions, Reuters reported.The decision will allow the EFSF to buy government bonds from crisis-stricken European countries or lend them money before they get into deeper trouble.Germany, already the biggest single EFSF contributor, is to increase its contributions further. Germany will be covering 211 billion euros of EFSF’s total 440 billion of guarantees.Germany is the biggest economy of the 17-nation Eurozone and the main participant in the EFSF, but the legislation must be ratified by all states before it can come into force.The vote sends a message not just to the Eurozone countries, but to the international community as well, that EU leaders are really willing to pull crisis-struck countries – Greece especially – out of the economic abyss.This initiative is extremely unpopular among the German public, who see the whole situation as utterly unfair. And of course, the aftermath of the vote will have a serious impact on what happens in Greece, where groups of civil servants occupied several ministry buildings on Thursday.Not all politicians in Germany are in favor of the new support plan for Greece.   “It’s not a help for the Greeks,” believes Diether Dehm, a German MP from Die Linke Party. “It’s for the banks”, he argued. “The [German] government is forced to do what helps weak German banks,” stressed Dehm. Although Chancellor Angela Merkel is very likely to convince the majority to vote for the package, Mr. Dehm’s Die Linke Party will strongly oppose the initiative, the MP told RT. Mr. Dehm sees a fundamental contradiction in the German proposal: it is built on market forces and free trade – capitalist arguments – rather than on a social base, he said.

Jan Hagen, a financial industry expert from the European School of Management and Technology in Berlin, told RT that inflating the bailout fund is only going to drag Greece further into debt and crisis.“Countries like Greece will get more funds after this agreement in Germany, but it does not actually solve the problem, which is overburdened debt levels. This has not been addressed so far. So I am not sure whether this measure will lead to anything in the long-term future,” he stated.Still, the agreement may be considered a political victory for Angela Merkel, Hagen said.“Politically it is a victory. People in Germany are not in favor of these bailout packages, nevertheless she managed to keep her coalition together for this decision. So in the short term she definitely gained some points, but I would say it is not over yet,” he added.