Germany’s Parliament finally approves a permanent euro zone bailout scheme. A new budget rules drawn up by German Chancellor Angela Merkel.
Both the bills were ratified by Germany’s lower house Bundestag and upper house Bundesrat with the required two third majority.With the ratification of the European Stability Mechanism and “fiscal pact” also called fiscal compact for budget discipline, Germany clarified its intentions to stand by the euro.The 500 billion euro fund ESM will be used to bailout the faltering economies of Italy and Spain.
European leaders have agreed to allow the use of rescue funds to recapitalize ailing banks directly.
European Council President Herman Van Rompuy told reporters about the agreement on Friday following overnight meetings at the EU summit in Brussels.The agreement states that by the end of this year bailout funds will be provided directly to banks rather than through their national governments.The decision comes as the governments of Italy and Spain are urging action to bring down their borrowing costs for financing public debt.Van Rompuy said the EU countries hope to finalize the plans when the region’s finance ministers meet on July 9th.The EU summit agreed to spend 120 billion euro, or about 149 billion dollars, to stimulate economic growth.