Europe's path to approving strengthened bailout fund

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 recapitalise 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 Sept. 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 centre-right coalition defect.

But the president of the German parliament, Norbert Lammert, has poured cold water on the government's plans of having a vote on the euro zone's financial rescue fund in parliament on Sept. 23.

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 Sept. 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 centre-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 - Finland's parliament will discuss and vote in September on the July agreement, according to the country's finance minister.

Jutta Urpilainen said "processing" of the July 21 deal would begin when the summer holiday ends around Sept. 6.

Prime Minister Jyrki Katainen told Reuters in a recent interview 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. [ID:nLDE7770WV]

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 towards euro zone rescue plans.

NETHERLANDS - Parliament reconvenes on Sept. 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. In a debate on Aug. 16., the governing Dutch parties said they were open to supporting a European fiscal authority that would punish euro zone countries which fail to obey budget rules.

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 centre-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 Sept. 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 centre-right Austrian People's Party and the centre-left Socialists.