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BERLIN (Reuters) - Germany's upper house of parliament won multi-billion euro financial concessions from Chancellor Angela Merkel's government on Sunday, clearing the way for parliamentary approval of the permanent bailout scheme for the euro zone and the fiscal pact.
Bavaria state premier Horst Seehofer and other state leaders told reporters on Sunday outside the chancellery they had reached a deal. Earlier, Seehofer threatened that the upper house would block the measures unless the federal government agreed to concessions worth billions of euros.
"We've reached an agreement that makes it possible for Bavaria to vote for the fiscal pact on Friday," Seehofer told reporters, flanked by other state leaders from the Social Democrats (SPD) and Greens.
"It's a reasonable agreement between the federal and state governments. The states all stuck together on this."
Vice Chancellor Philipp Roesler told reporters after the agreement: "This is a good signal for Europe."
Seehofer, who holds the rotating presidency of the upper house, had told Bild am Sonntag newspaper on Saturday the upper house would not vote for the fiscal pact without concessions.
"I am very much in favor of the fiscal pact but we are going to have a difficult situation if they stay stubborn in Berlin," Seehofer told the newspaper.
The lower and upper houses of parliament, the Bundestag and Bundesrat, are set to vote in separate sessions on the European Stability Mechanism (ESM) and the so-called "fiscal compact" on Friday, June 29.
Merkel needs a two-thirds majority in both houses for the fiscal pact. Leaders of the opposition centre-left SPD and Green parties told Reuters on Saturday they would back the measure.
Seehofer, who is also the leader of the Christian Social Union (CSU) that is a sister party to Merkel's Christian Democrats (CDU), had said the states and communities needed assurances of more federal funding first, especially for services for the handicapped.
The states wanted federal financial support worth 12 to 13 billion euros per year for handicapped care. The two sides agreed that the federal government would take a share of those costs after 2013. Saxony-Anhalt's state premier said the federal share would be about 4 billion euros per year.
The federal government also agreed to continue paying certain amounts for community transport costs.
While the ESM bailout fund was meant to come into effect on July 1, draft conclusions seen by Reuters on Thursday for this week's summit of EU leaders showed they now aimed to make it operational on July 9 due to delays in the ratification process in several euro zone countries, not only in Germany.
Full ratification also requires the signature of German President Joachim Gauck and a nod from the constitutional court in Karlsruhe.
Additional reporting By Matthias Sobolewski; Editing by Ralph Gowling