German Parliament Approves Fiscal Pact and Bailout Fund

Germany's Chancellor Angela Merkel
Angela Merkel, Germany's chancellor, center, smiles and gestures as she arrives for the second day of the European Leaders (EU) summit at the European Council headquarters in Brussels, on June 29, 2012. Photographer: Jock Fistick/Bloomberg

Germany’s parliament approved the European Union’s fiscal pact and the permanent euro bailout fund with clear majorities as Chancellor Angela Merkel pledged solidarity and vowed to overcome the debt crisis.

The measures won two-thirds majorities in both the lower and upper chambers, the Bundestag and Bundesrat, in sessions that stretched yesterday until nearly midnight. Returning from Brussels, where Merkel conceded to demands to offer relief to Spain and Italy at an EU summit, the German leader called the fiscal pact for budget discipline and the European Stability Mechanism “necessary” to overcome the crisis.

“This is a signal of solidarity and determination, domestically as well as abroad,” Merkel told lawmakers yesterday before the vote in Berlin. Passage is “a signal to overcome the European sovereign debt crisis in a sustainable way -- and a signal from us that Europe is our future.”

Parliamentary approval doesn’t include Merkel’s agreement with other leaders of the 17-member euro bloc yesterday to relax conditions on bailout funding. Still, the unusual double vote underscored the insistence by lawmakers in Berlin to assert control over euro-crisis measures.

Merkel’s seeking two-thirds majorities in both houses for approval of the bills required her Christian Democratic-led bloc to make concessions to the opposition Social Democrats and Greens as well as to the German states on growth-boosting steps and a financial-transaction tax.

For Europe

Greens parliamentary leader Juergen Trittin said in a speech to the Bundestag his party backed the legislation because “we need to vote to preserve this Europe.”

Merkel said the agreed-upon process to establish a euro-area banking supervisor and enable the ESM to recapitalize banks directly “would take several months or perhaps a year.” Parliament would need to approve the changes.

The two measures now await the signature of German President Joachim Gauck, who said June 21 that he would withhold passage pending potential lawsuits to challenge the new laws, as requested by the Federal Constitutional Court.

Approval “was widely expected given the deals struck between Merkel’s CDU and the opposition in the past few days, but it still marks an important milestone,” Thomas Costerg, an economist at Standard Chartered Bank in London, said in a e-mailed response to questions.

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