Back from the brink?

European leaders breathed a collective sigh of relief on Thursday after German lawmakers approved a crucial vote to boost the eurozone's bailout fund.

The European Commission hailed Germany's decision to strengthen the fund, with a spokesman for Economic and Monetary Affairs Commissioner Olli Rehn describing the bloc as "happy," as European politicians lined up to welcome the result.

French Finance Minister Francois Baroin said the vote "confirmed the German determination to preserve the financial stability of the eurozone." He added that he was confident in the capacity of the eurozone to preserve its integrity "and the strength of its common currency."

Greece and its struggling economy, teetering on the edge of bankruptcy, also welcomed the news, with Finance Minister Evangelos Venizelos expressing his "satisfaction and his optimism" in a statement.

"Germany's ratification is essential for the eurozone ... we are satisfied and optimistic that the [EU] decisions of July 21 will be ratified by other countries," he said.

Twelve of the 17 eurozone states have now agreed to increase the size and scope of the European Financial Stability Facility, or EFSF. Germany's approval on Thursday was largely seen to have pulled Europe back from the brink.

Cyprus and Estonia also approved legislation on the bailout fund on Thursday, and Austria is expected to vote on Friday. The three remaining eurozone nations, Malta, the Netherlands and Slovakia, are due to vote in October.

Under the new terms, the EFSF's lending capacity will be increased to 440 billion euros ($600 billion) and it will have new powers to buy up bonds of shaky economies or lend to governments before they reach full-blown crisis.

Market boost

European stocks jumped Thursday as news of the vote, coupled with better-than-expected US economic data, reassured investors.

Frankfurt's DAX closed up 1.1 percent, while France's CAC-40 rose 1.07 percent. London's FTSE-100 also rose on the news but closed down 0.4 percent, but this was attributed to weak mining stocks. But with Greece still on the edge of default, European markets remain volatile.

On Thursday, auditors from the European Union, the European Central Bank and the International Monetary Fund resumed talks with officials in Athens to decide whether Greece will receive the next round of its bailout, worth some 8 billion euros. The auditors, known as the troika, are to assess the success of Athens' latest cost-cutting program.

As the troika began its talks, hundreds of demonstrators at the Finance Ministry, joined by public servants from the ministries of health, agriculture and justice, blocked the doors of government offices to protest the new wave of austerity measures.

"They have cut our salaries by a third and we no longer get overtime - how much more are we being asked to survive?" Areti Kyriakousi, a biologist at a state hospital, told the news agency dpa.

"It has even gotten to the point that we do not know whether we will receive next month's salary - there is no incentive to work anymore."

Prime Minister George Papandreou is due to travel to Paris on Friday to meet with French President Nicolas Sarkozy to discuss Greece's debt situation.

Author: Charlotte Chelsom-Pill (AFP, Reuters, dpa)
Editor: Martin Kuebler