Koehler signs euro zone rescue package into law

Germany's participation in a historic Euro750 billion (nearly $1 trillion) rescue package for the financially-troubled euro zone nations has been sealed with President Horst Koehler signing into law a legislation on the country's contribution.

Both houses of the German parliament on Friday approved the bill on the country's share of Euro148 billion in the rescue package and Koehler signed it at the weekend soon after his return from a visit to China and Afghanistan.

It is a key component of the rescue plan and the highest financial support given by Germany to its euro zone partners since the single currency was created eleven years ago.

Germany's contribution is part of a Euro440-billion loan guarantee, which will support the borrowing of cash-strapped euro zone nations over three years.

The European Commission will provide an emergency assistance of Euro60 billion while the International Monetary fund will contribute up to Euro250 billion.

The rescue package for the euro zone nations was agreed by the finance ministers of the 27 European Union nations and the IMF on May 10 in Brussels to prevent the debt crisis in Greece from spreading to other debt-ridden nations such as Portugal, Spain and Ireland and to shore up the single currency.

All 16 European Union nations which use the euro will have access to the rescue fund. Earlier this month, the EU and the IMF offered Greece a rescue package of Euro110 billion to prevent the country from defaulting on its debts and Germany has a share of Euro22.4 billion in that bailout package.

Chancellor Angela Merkel could not get the broad parliamentary support she was seeking for the euro zone rescue package when the bill came up for voting in the Bundestag, the lower house.

After a heated debate, during which the opposition accused Merkel of lacking a strong leadership to address the debt crisis, the bill was passed by 319 votes while 73 members of the Parliament voted against and 195 abstained.

The opposition Social Democratic Party and the ecological Green Party abstained because the parliament was not 'sufficiently informed' about how Germany's share will be raised and under what conditions it will be distributed through a Special Purpose Vehicle known as the European Financial Stabilisation Mechanism.

The SPD also made a strong involvement of financial institutions in paying for the costs of future financial crisis through a financial transaction levy as a condition to vote for the legislation.

Six MPs belonging to ruling centre-right coalition also abstained, underlying the differences within the government over the rescue package.

Peter Gauweiler, an MP belonging to Merkel's coalition partner Christian Social Union said at the weekend that he intends to seek an injunction on the plan at the Federal Constitutional Court, Germany's highest court.

The Bundestag, the upper house, voted for the bill on the same day, even though the ruling centre-right coalition had lost its majority in the house after its defeat in the state election in North Rhine Westphalia two weeks ago.

The SPD abstained in the voting in the Bundesrat, enabling the bill to get through.

Image: German President Horst Koehler