Forex News – German bundestag voted in favour of expanding the EFSF rescue fund

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The euro rose versus the dollar after release of the news that the German Parliament voted by a large majority to enhance the European Financial Stability Facility (EFSF)and to give it more powers.

The single currency rose to $1.3678, close to the session high, from around $1.3653 before the result of the vote. Against the Japanese yen it was last up at 104.70 yen.

 

In the vote, that was the biggest test of Chancellor Angela Merkel’s leadership since she took power six years ago, 523 lawmakers backed more powers for the fund, 85 voted against it and 3 abstained.

Merkel had tried to assure her coalition that taxpayers’ money would not be wasted by supporting bailout measures — but she could not rule out that the money might be written off if Greece defaults, as financial markets increasingly fear

Germany will shoulder up to 211 billion euros of the fund’s 440 billion euros worth of guarantees, but critics fear it is already clear this will not be enough and taxpayers will be asked for more.

That impression was reinforced by talk at the International Monetary Fund last weekend of the need to beef up the EFSF even more — on top of the extra powers decided by European leaders in July — by leveraging its capital and bring forward the permanent scheme supposed to replace it in mid-2013.

Finance Minister Wolfgang Schaeuble told the Bundestag (lower house of parliament) in a fiery debate before the vote it was “indecent” to speculate at this point about Germany being asked to contribute more to the EFSF.

“We’re borrowing money from our children to put in a showcase and it is money that we don’t have,” said one rebel in Merkel’s Christian Democratic Union (CDU), Klaus-Peter Willsch.