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German government, opposition join forces to save euro

The main opposition parties have agreed to support Chancellor Angela Merkel's economic measures for stability in the eurozone. The deal aims to cut back public debt but also boost growth and employment.

Following a meeting with Merkel's conservative coalition on Thursday, the opposition Social Democrats and Green party announced they would support plans paving the way for the European Stability Mechanism (ESM).

They said they had reached an agreement to boost growth and create more jobs in the eurozone, as well as curb debt and implement tighter controls.

"This is an important step away from focusing on saving alone," said SPD chairman Sigmar Gabriel.

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Politicians find consensus

The parliamentary leader of Merkel's conservative CDU, Volker Kauder, said the agreement was "a good sign for Europe," though he reiterated Germany's stance that there would be no mutualization of European debt.

To finance the measures to boost growth, Germany will push for the implementation of a European financial transaction tax - a demand the opposition had put forward as a condition for their support.

The agreement will now enable the German parliament to ratify Europe's fiscal pact and bailout mechanism.

Left party challenge

The ESM is designed to become the 17-member eurozone's permanent bailout fund for financially embattled member states. It is supposed to replace the temporary European Financial Stability Facility (EFSF) on July 1. The ESM is expected to have some 500 billion euros ($633 billion) at its disposal.

Merkel, who championed the ESM proposal, needs the support of the main opposition to get the two-thirds majority in the Bundestag (lower house) and Bundesrat (upper house).

Meanwhile Germany's socialist Left party has threatened to file a motion with the Federal Constitutional Court to stop ratification.

They claim the ESM and the fiscal pact violate the rights of the Bundestag and infringe on Germany's sovereignty by turning over certain budgetary responsibilities to the European Union.

Still, both houses of Germany's parliament are set to vote on the ESM and fiscal pact on June 29, before the ESM is due to come into force two days later.

rg/ncy (Reuters, dpa)

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