Merkel risks rebellion on euro rescue fund

09-27-2011 • www.reuters.com

(German Chancellor Angela Merkel and Greek Prime Minister George Papandreou attend a meeting of the BDI (Federational German Industries) in Berlin, September 27, 2011)

(Reuters) - German Chancellor Angela Merkel may fall short of a majority in her own coalition for a crucial reform of the euro zone rescue fund meant to stop a sovereign debt crisis spreading, in what would be a severe blow to her authority, a test vote showed.

Talk of proposals to leverage up the 440 billion euro ($598.5 billion) bailout fund to multiply Europe's financial firepower lifted global stocks on Tuesday but made it harder for Merkel to unite her fractious center-right coalition.

The Bundestag (lower house) is sure to approve a widening of the scope of the European Financial Stability Facility to aid weak states and banks, agreed by European leaders in July, since the opposition Social Democrats and Greens say they will vote for the measure on Thursday.

But a revolt by Euro skeptical backbenchers hostile to further bailouts in Merkel's conservatives and their liberal Free Democratic coalition partners may leave her without a majority in her own camp.