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Germany backs EU bailout fund boost

Germany has kept alive hopes that the euro can survive the sprawling debt crisis when lawmakers voted overwhelmingly in favour of expanding the powers of the eurozone's bailout fund.

The vote strengthened Angela Merkel's centre-right coalition, which had struggled to win support from a bloc of rebellious members, and could bolster her ability to negotiate new European crisis measures.

While many investors and experts believe new steps will be required in Europe, such as letting Greece write off more of its debt pile, Germany's approval of the fund's new powers and scope was necessary to avoid a new bout of massive market turmoil.

"The support of the Bundestag is an important step for stabilising the eurozone," said Michael Kemmer, head of Germany's Bank Federation.

The 440 billion euro (£384 billion) fund will be able to buy government bonds and lend money to banks and governments before they are in a full-blown crisis, making Europe's response to market jitters more rapid and pre-emptive.

Germany, which pays the lion's share of European bailouts, became the 13th member of the eurozone to support the expansion of the rescue fund, the so-called European Financial Stability Facility, or EFSF. Cyprus also passed the proposed expansion.

Austria's parliament is widely expected to pass the measure on Friday, the same day Germany's upper house of parliament is set to finalise the vote, while the Netherlands is expected to approve it in the first week of October.

The biggest remaining hurdle is the final country to vote - Slovakia - where the government will not have enough support to pass it if the leader of the junior coalition Freedom and Solidarity party follows through with threats to vote against the fund's expansion. Its parliament is to vote later in October.

In Berlin, 523 lawmakers in parliament voted in favour of expanding German participation to guarantee loans of up to 211 billion euro (£184 billion), compared with 123 billion euro (£107 billion) so far. Eighty-five voted against it and three abstained.

"It was a strong statement of Angela Merkel's position. She has the backing and the support of the coalition and she is able to negotiate on the European level," Peter Altmeier, the parliamentary whip for Merkel's Christian Democrats, said.

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