Merkel rallies lawmakers ahead of votes on crisis tools

Chancellor Angela Merkel rallied lawmakers to approve two euro-crisis fighting tools ahead of a vote later Friday, saying it would show the world Germany's commitment to the single currency. Hard on the heels of a "breakthrough" EU summit, Merkel dashed back from Brussels to address the German parliament before MPs vote on new rules for budgetary discipline and a permanent bailout fund. "What we decide today is an important step to make clear to the world that we stand by the euro, we want it as our stable currency," Merkel said in her second speech to parliament on the euro crisis in three days. The ratification of the EU fiscal pact requires a two-thirds majority in both the lower house of parliament, the Bundestag, and the upper Bundesrat chamber, meaning Merkel needs opposition support. Weeks of horse-trading with the centre-left Social Democratic Party (SPD) and ecologist Greens mean she can be quietly confident of parliament's approval, but the EU deal struck earlier rattled some lawmakers. SPD budgetary affairs expert Carsten Schneider earlier accused the government of a "U-turn" by agreeing to go along with the bailout fund being used to recapitalise ailing banks directly and that it can buy countries' bonds to drive down high borrowing costs. Facing pressure from Italy and Spain, EU leaders agreed the European Stability Mechanism (ESM) can be tapped to recapitalise banks without having to go through governments in moves that often just add to a country's mountain of debt. Merkel defended what had been decided in Brussels saying any use of the bailout funds would keep to agreed guidelines, calling it a "good decision, a sensible decision." And she stressed that the outcome of the EU summit was "in no way" a part of the imminent decisions facing German MPs and said any changes or new competencies would have to come before the parliament first. Approval of the fiscal pact and ESM fund, Merkel said, would be a "sign of unity and determination, domestically and abroad". The 500-billion-euro ($623 billion) ESM cannot be established without Germany's backing as it needs to have been ratified by countries making up 90 percent of its capital to take effect. The fund was originally to begin operations on July 1 but is now widely expected to be pushed back by at least a week. However Germany is likely to face a further delay after President Joachim Gauck agreed to a request by the constitutional court to refrain from signing off on the two laws immediately after their parliamentary approval. The court said last week that it needed up to three weeks to examine a likely legal challenge to the fiscal pact and bailout mechanism threatened by the far-left Linke party. Germany's top court has a history of strengthening the role of the parliament on European issues. Later on Friday, members of the Bundesrat representing Germany's 16 regional states are to decide on the two key texts, squeezing in their votes before the summer break. To obtain backing in Germany, Merkel accepted SPD and Green party demands for growth measures, and secured the support of regional leaders by agreeing measures to offset the impact on regional finances of new demands for budgetary rigour, among other things. Merkel also wants to win two-thirds majority backing for the ESM rescue fund, to which Germany will contribute 22 billion euros as well as provide guarantees, to ward off possible future constitutional challenges.