Germany's parliament on Friday overwhelmingly approved a 500 billion euros ($675 billion) rescue package for the country's financial markets. “We hope that the law passed today will hinder the worst from happening to the financial markets,” said Peter Struck, parliamentary leader for the Social Democrats, which make up half of Chancellor Angela Merkel's coalition government. The German plan, handed to parliament after approval Monday by Merkel's Cabinet, is part of a coordinated European bailout effort in the face of nervous, volatile markets. Earlier this week, Merkel warned that “the danger for financial market stability has not yet been banished.” “We must, by approving this bill, as quickly as possible create the basis for calming the situation on the markets,” she said. The German package foresees up to 400 billion euros ($540 billion) in lending guarantees for banks. On top of that comes as much as ¤80 (US$108) billion to recapitalize banks and, if necessary, buy up risky assets; plus 20 billion euros ($27 billion) to back up the guarantees. The sums are considered a maximum, and might not all be spent if the financial crisis eases. Merkel has stressed that there will be “no payment without a trade-off.” Banks seeking capital help will have to comply with government-set conditions that could include limits on managers' pay and directions on lending policy. Lawmakers in the lower house voted 476 in favor and 99 against the plan, with one abstention. The upper house then approved the package unanimously. Before the lower house vote, leaders of the opposition Greens and Left Party said their members would cast their ballots against the package, while the pro-business Free Democrats said they would join Merkel's governing coalition of Christian Democrats and Social Democrats in approving it. President Horst Koehler formally signed it into law Friday afternoon, and Merkel's Cabinet has already arranged a special meeting for Monday to discuss implementing the plan. The package comes a day after Germany, Europe's biggest economy, lowered its GDP growth estimate for 2009 by a full percentage point to 0.2 percent because of uncertainty in the world financial systems. In the past week, Germany's DAX index of the country's 30 biggest companies has pitched through positive and negative closings, largely following Wall Street's lead. It closed down nearly 5 percent on Thursday, though was up more than 2 percent early Friday afternoon. The swings were primarily caused by financial stocks, as investors tried to assess what impact the rescue package might have and how large the economic fallout from the credit crisis would be. Speaking on the floor of the Frankfurt stock exchange Friday, Robert Halver, the head of market research for Baader Wertpapierhandelsbank AG, was skeptical about the rescue package. He said most private banks in Germany will probably carefully consider taking on the government's funds because it will mean more oversight. “Every bank will consider three or four times before accepting this involvement,” he said.
