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Germany approves expansion of European bailout fund

By the CNN Wire Staff
updated 9:29 AM EDT, Thu September 29, 2011
German Chancellor Angela Merkel, left, with Finance Minister Wolfgang Schauble at the lower house of parliament in Berlin.
German Chancellor Angela Merkel, left, with Finance Minister Wolfgang Schauble at the lower house of parliament in Berlin.
STORY HIGHLIGHTS
  • Germany's lawmakers passed the measure by a large majority
  • It is one of a number of European countries that must ratify the plan
  • Germany's ratification of the expansion plan is key because of its economic power

Berlin (CNN) -- Germany's parliament voted Thursday to increase the powers of Europe's bailout fund, as Greece's debt woes fuel fears of a wider financial crisis.

The vote passed by a large majority -- 523 in favor to 85 against, with three abstentions -- which should boost confidence in European markets.

Expansion of the European Financial Stability Facility -- Europe's bailout fund -- so it can increase its lending capacity from around €250 billion to €440 billion must be ratified by a number of European countries.

Germany's parliamentary approval follows votes in favor this week from Austria and Finland.

But the vote in Germany's lower house of parliament, the Bundestag, was seen as particularly crucial because it is the eurozone's biggest economy, and its Chancellor Angela Merkel is a key figure in attempts to pull the bloc out of its crisis.

The bailout fund is being increased after the initial fund, which was put in place after Greece's €110 billion bail out last May, was tapped by Ireland and Portugal, before Greece returned for more help.

The original fund was meant to stem the crisis but this has not happened. Instead, the crisis has intensified, feeding global instability and driving the eurozone to the edge of recession.

The new powers will allow the fund also to buy sovereign bonds in the capital markets, a strategy designed to prop up debt prices and help struggling eurozone countries fund themselves.

CNN's Frederik Pleitgen, Rick Noack and Irene Chapple contributed to this report.

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