Germany's parliament has approved reforms to the European Financial Stability Facility (EFSF) that would allow the fund to participate in the primary market and to recapitalize European banks in a much-anticipated vote in the Bundestag.
The vote in the Bundestag, which was set to be another milestone – and another drama in the travelling circus of Europe's crisis response – seems to have passed without major incident, as potential rebels within Chancellor Angela Merkel's ruling coalition were contained. 523 lawmakers voted in favor of the reform, with 85 opposing and three abstaining.
European stocks rose, and bund yields fell as the markets reacted positively to the result. The euro [EUR=X 1.362 0.0092 (+0.68%) ] rose against the dollar.
However, the debate on crisis management mechanisms is moving ahead of the politics once again, as the realization that solvency and growth concerns outweigh liquidity shortages begin to creep through.
Early concerns that euro zone parliaments would derail reforms allowing the EFSF - the temporary bailout fund created to shore up the Greek capital markets and limit contagion into the rest of the single currency area – to participate in the primary market for sovereign debt and to recapitalize banks now appear unfounded.
Finland, whose politicians have been amongst the most vocally critical participants in the conversation on financial assistance and institutional reform in Europe, voted on Wednesday to pass the reform of the EFSF, despite their desires for collateral looking decreasingly likely to be met.
Slovenia, whose government collapsed on September 20, saw the reform sail through parliament on September 27.
Austria, which votes on Friday, should also pass the reform, analysts said, with the government and opposition Green party both backing the bill.
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