* Merkel wins 2/3 majority with opposition help in both
* Eurosceptics angered by concessions at EU summit
* Court will delay ratification, may seek referendum
By Gareth Jones and Stephen Brown
BERLIN, June 29 Germany's parliament
resoundingly approved the euro zone's permanent bailout scheme
and new budget rules on Friday, but legal hurdles remain and
Chancellor Angela Merkel's concessions to euro zone partners
Italy and Spain may make those harder to overcome.
The outcome of the vote was never seriously in doubt after
opposition parties agreed to back the budget rules, or "fiscal
compact", in return for growth and job creation measures. Merkel
needed their support to get a required two-thirds majority.
"Today Germany, with the approval of the fiscal pact and the
ESM by all parties in both houses of parliament, will send an
important signal ... that we are overcoming the European debt
crisis in a sustainable way," Merkel told the lower house, the
Bundestag, before the votes.
Merkel had returned for the debates and the vote from a
European Union summit in Brussels that agreed to give the euro
zone's bailout funds more flexibility to stabilise bond markets
and to directly recapitalise banks in the future.
The upper house, the Bundesrat, also later gave its seal of
approval to both pieces of legislation. But President Joachim
Gauck has said he will not sign them into law until Germany's
powerful Constitutional Court has given its go-ahead.
Ratification of the two tools for combating the debt crisis
may also force Germany to test its commitment to Europe in a
referendum as anger grows over aid to weaker countries.
Merkel said the deal at the EU summit to use the rescue
funds to ease Spanish and Italian borrowing costs without extra
austerity measures, and to recapitalise banks directly, did not
violate her mantra of no aid without conditionality.
But it could exacerbate impatience with the bailouts in
Germany, which has no big Eurosceptic party but where Merkel's
centre-right coalition includes a small but vocal band of rebels
who voted "No" to the ESM in the Bundestag on Friday.
Klaus-Peter Willsch, a member of the Bundestag from Merkel's
Christian Democrats (CDU), said the concessions would result in
"Germany being liable for everyone".
CDU budget expert Norbert Barthle said the Bundestag must
approve any future decisions on direct recapitalisation of euro
zone banks by the ESM, adding: "Clearly such aid would also only
be guaranteed under strict conditions and control."
While backing the fiscal compact on Friday in return for
government concessions on economic growth, opposition parties
repeated their criticism of Merkel's emphasis on austerity
measures, saying they had exacerbated the euro crisis.
"I only hope the growth initiatives have not come too late,"
Sigmar Gabriel, chairman of the centre-left main opposition
Social Democrats (SPD), told the Bundestag.
"We are voting 'Yes' (to the fiscal pact) because Europe is
more important than party political rivalries."
The bailout scheme cannot come into effect without German
backing as it needs approval by countries making up 90 percent
of its capital base. This has now been put back to July 9, with
only a handful of the euro zone's 17 countries having complied.
But Germany risks missing the second deadline too, due to
the need for the backing of the Constitutional Court, which has
slapped the government's wrist before for taking short cuts on
This could take weeks. In a series of rulings since 2009,
the court in Karlsruhe has expressed reservations about the
steady transfer of power to Brussels, and affirmed the right of
Germany's parliament to vet decisions taken at European level.
Tension between Germany's democratic principles and a push
to give Brussels more power to intervene in national policy
appears to be approaching breaking point.
The court, bombarded by petitions from politicians and
academics to block the ESM and fiscal pact, may decide to clear
them but demand steps "to ensure that the upper and lower houses
of parliament are sufficiently involved", said Daniel Thym, law
professor at the University of Constance.
There is a chance it could link approval to a change in the
constitution - which would require Germany's first national
referendum in the post-war era. At the very least, experts say,
the court could say approval for any future integration, beyond
the ESM and fiscal compact, would require constitutional change.
Calling a referendum would be a risky ploy in Germany, where
Adolf Hitler gave plebiscites a bad name in the 1930s by using
them to amass power as Fuehrer, stuff the Reichstag with Nazis
and legitimise occupying the Rhineland and annexing Austria.
But europhile Finance Minister Wolfgang Schaeuble says the
changes being contemplated - on the road to "political and
fiscal union" - may need a referendum sooner than many think.
The leader of Merkel's Bavarian ally, the CSU, Horst
Seehofer, wrote in business daily Handelsblatt: "Politicians
cannot simply impose more Europe on us from the top down ...
That's why I'm pleading for our constitution to allow us to have
referendums on all important European matters."