August 12, 2011 / 3:20 PM / 8 years ago

Factbox: Europe's path to approving strengthened bailout fund

(Reuters) - Euro zone countries have pledged to win swift parliamentary approval for a July 21 deal to widen the powers of their bailout fund to help member states in difficulty and fight financial market contagion.

The agreement will allow the European Financial Stability Facility to give precautionary loans on strict conditionality to countries under attack on bond markets and to buy sovereign bonds on the secondary market based on a European Central Bank assessment of exceptional circumstances.

The 440-billion-euro EFSF will also be allowed to lend governments money to recapitalize banks. The same powers will be given to the future permanent European Stability Mechanism, which takes over from the EFSF in mid-2013.

Here is an overview of plans to approve the new rules in selected euro zone countries.

GERMANY - Parliament reconvenes after summer recess on September 5. Approval is expected in September. The opposition Social Democrats have said they will vote for the EFSF/ESM framework agreement, ensuring its passage even if some members of Chancellor Angela Merkel’s center-right coalition defect.

Some lawmakers among Merkel’s Christian Democrats have demanded that a party congress be brought forward to exert more control on her European policy before the parliamentary vote.

FRANCE - Government approval is enough in France. The fiscal consequences of it then get folded into the budget law which is voted on in parliament as normal and should be easily passed. The French will present a revised budget to parliament in early September incorporating additional debt due to their guarantees of the EFSF.

SLOVAKIA - Parliament reconvenes on September 6. No date has been set yet for the EFSF/ESM debate and vote. The government has indicated it is likely to be in September but has not yet decided whether to use fast-track procedure.

Prime Minister Iveta Radicova is not certain of a majority because one party in her center-right coalition, SaS, led by parliament speaker Richard Sulic, has said it opposes expanding the EFSF’s mandate. [ID:nL6E7J81U6] A coalition source said Sulic was under fierce pressure to fall into line.

His objection could delay implementation of the deal and make it dependent on the pro-euro left-wing opposition SMER party of former Prime Minister Robert Fico, a fierce critic of the government. That might bring the coalition down.

FINLAND - Parliament reconvenes on September 6. The Finance Ministry says no date has been set for the EFSF/ESM debate and vote because the final official document has still not been circulated to member states.

Prime Minister Jyrki Katainen told Reuters in an interview on Monday he was confident parliament would pass the plan as soon as legislative preparations are completed, although he could not say when. “I would say it will get through well. These policies have had the support of the government and the Grand Committee as well,” he said.

However, there is a risk that some members of the government coalition Social Democratic Party and Leftist Alliance vote against. The opposition True Finns are strongly opposed to bailouts in general.

Finland has demanded collateral for any further loans to Greece. It is also against expanding the size of the EFSF, or issuing euro-area bonds. If any of those issues arise while parliament is deliberating, it could force Katainen or Finance Minister Jutta Urpilainen to take a more critical stance toward euro zone rescue plans.

NETHERLANDS - Parliament reconvenes on September 6 but a vote on the EFSF/ESM changes is expected in October at the earliest. That would make the Dutch probably the last to approve.

The changes do not legally require parliament’s approval, since they do not affect the size of Dutch guarantees for the EFSF. But politically the government needs its backing.

A majority last month supported the July 21 euro zone bailout agreement for Greece. The finance committee will meet next week, probably on Tuesday August 16, and has invited Finance Minister Jan Kees de Jager and Prime Minister Mark Rutte to discuss issues including the EFSF changes and to clarify details of the Dutch contribution to the Greek bailout. Some of the political parties have said they want to propose motions, and for this a plenary session of parliament will be required, tentatively scheduled for Wednesday August 17. These debates will show how much support there is among MPs for the EFSF changes and other rescue measures.

Any change of position by the opposition Labour party could derail the approval process because it is the second largest in the lower house. Prime Minister Rutte’s minority center-right coalition of Liberals and Christian Democrats depends for support on the right-wing populist Freedom Party, which is against supporting Greece. The Freedom Party could threaten the approval process if it withdrew support for the coalition.

The Dutch government opposes increasing the size of the EFSF and insisted on private sector involvement in the second Greek bailout.

AUSTRIA - Parliament resumes session on September 21. No date has been set for the EFSF vote, which requires only a simple majority, unlike a on the creation of the ESM, where a two-thirds majority is needed for ratification.

A parliamentary official said fast-track approval could take place within two days with the votes of the ruling coalition of the center-right Austrian People’s Party and the center-left Socialists.

reporting by Andreas Rinke in Berlin, Ritsuko Ando in Helsinki, Gilbert Kreijger in Amsterdam, Michael Shields in Vienna; writing by Paul Taylor; editing by Sitaraman Shankar

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