UPDATE 2-Merkel calls for bailout fund support before vote

Tue Oct 25, 2011 11:41am EDT

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By Madeline Chambers

BERLIN, Oct 25 (Reuters) - Chancellor Angela Merkel appealed to German lawmakers from all parties on Tuesday to back plans to boost the firepower of the euro zone rescue fund in a vote set to take place hours before Wednesday's crunch EU summit.

Merkel needs to win the parliamentary vote to have a mandate to negotiate a deal with other EU leaders aimed at delivering a range of measures to stop the euro zone debt crisis spiralling.

The bill is set to go through parliament as the government has agreed a joint motion on the plans with the opposition Social Democrats (SPD) and Greens but Merkel still faces a rebellion from within her own centre-right coalition.

A test run held on Tuesday showed she is likely to win the vote without having to rely on opposition parties' support -- but only just. In the ballot, a total of 16 lawmakers from Merkel's coalition parties either voted against or abstained.

The proposals, to increase the efficiency of the 440 billion euro ($610 billion) fund without pouring more taxpayers' money into it, are the subject of fierce debate in Europe's largest economy and biggest contributor to the fund.

"The international negotiating position must be to get the best for Germany and for Europe," Merkel told reporters.

"I am bound by my oath of office to avert damage for the German people, to do good for the German people. That must be the guiding principle in my negotiations," she said, adding she was pushing for as much support as possible in the vote.

Merkel is battling sliding ratings for herself and her centre-right coalition over her handling of the euro zone crisis and most Germans oppose granting more aid to Greece. Critics at home and abroad have accused her of taking a dithering approach that has exacerbated the debt crisis.

Peter Altmaier, parliamentary floor leader of Merkel's conservative bloc, urged all parties to back the plans.

"Europe expects us to be the standard bearer on this matter and the Bundestag to take a clear position that stretches across the parties," he told reporters.

SLOW DEMOCRACY

On Monday, her conservatives unexpectedly announced the Bundestag lower house would hold a full vote on the new guidelines on the European Financial Stability Facility (EFSF).

Merkel's hands have been tied in her negotiations on the euro zone crisis since a Constitutional Court ruling last month demanded a greater say for German lawmakers on bailout issues. That ruling has frustrated some EU leaders eager to implement quick solutions. Even after the summit, Germany's parliamentary budget committee must meet to discuss the outcome.

"The Chancellor wants to have as big a majority as possible. In putting her proposals to parliament as a whole, she is using the Bundestag as a proxy for the general public," said politics professor Juergen Falter of Mainz University.

"It is very unlikely that this won't pass," he added.

Just a month ago, Merkel struggled to contain a rebellion from within her own centre-right coalition in a parliamentary vote on the EFSF. She was only five votes short of having to rely on opposition support which would have been a major blow, possibly even triggering early elections.

Falter said she could not be certain of getting the plans through with a "Chancellor's majority" from her own coalition, rather than relying on the opposition this time round.

"If she didn't get it (the chancellor's majority), it would be a blow in the medium term," said Falter.

The opposition Social Democrats (SPD) and Greens have complained about the lack of time to look at the guidelines but have long argued for stronger tools to tackle the crisis.

"There is a basic agreement between the (ruling) coalition and the opposition," said SPD budget expert Carsten Schneider, adding that parliamentary parties still had to vote on the draft motion .

REBELS AT THE READY

Merkel's Free Democrat (FDP) coalition partners said they would back the plans.

However, rebels are gearing up to defy Merkel.

"I will again vote "no" as all these measures are not helping to solve the problem in the long run," Wolfgang Bosbach, a prominent CDU rebel who complained of being browbeaten in the run-up to last month's vote.

The EU paper, obtained by Reuters, shows two options for increasing the fund's firepower -- an insurance model and a special purpose investment vehicle (SPIV) .

Investors hope leaders will on Wednesday decide which of the two approaches should be used, or a combination.

Bosbach will be joined by FDP waverers who fear the crisis is spiralling out of control.

"I worry that Italy will be attached to the drip. If that happens, the crisis will take on new proportions. No leveraged rescue mechanism in the world will be enough," FDP lawmaker Frank Schaeffler told Handelsblatt.

The conservative Christian Social Union (CSU), which has taken a tougher line on Greece than its sister CDU party and is more sceptical towards Europe, played down the importance of the plans getting through without relying on the opposition.

"We need a majority in the Bundestag, it is certain that we will get that." said Gerda Hasselfeldt, leader of the CSU parliamentary party in Berlin. Asked what it would mean if support fell short of the "chancellor's majority", she said:

"That means nothing for the EU summit, and certainly no weakening of the chancellor."

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