By Vittorio Hernandez

Berlin, Germany

The Bundestag, Germany's Parliament, agreed to increase the country's guarantees on European Union loans to $284 billion from $167 billion.

The 523 to 85 vote gave the European Financial Stability Facility (EFSF) power to purchase bonds in secondary markets, enable bank recapitalization and offer precautionary credit lines.

The Bundestag also approved the increase in the EFSF to $599 billion. The measure was approved because of the support of the Christian Democrats, Free Democrats, Social Democrats and Greens.

The approval of the hike represents a victory for German Chancellor Angela Merkel, who spent weeks campaigning for approval of the July 21 agreement by eurozone leaders. Germany holds the largest amount of Greek government bonds.

However, German Finance Minister Wolfgang Schauble and Economics Minister Philipp Roster said any further increase was out of the question.

With the European Commission expecting the larger EFSF in place by mid-October, zone leaders are now focusing on how to prevent the region's debt crisis from spreading further. One of the measures they are eyeing is the establishment of a permanent rescue fund that would provide more capital and tools to manage defaults.

However, the chairman of a private-equity firm said the newly approved bailout package would not be enough to solve the eurozone's debt problems. He suggested that the amount should be in the trillion-euro level, not just billion.

Austria is expected to ratify the expanded rescue fund on Friday, while four other countries have yet to vote on it.

 

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World - German Parliament Approves Hike in EU Loan Guarantees | Global Viewpoint