Merkel set for bailout fund support from parliament

German chancellor Angela Merkel looks set to receive wide parliamentary backing for plans to boost the Eurozone rescue fund before she heads to a high-stakes European summit.

Following a speech by the chancellor, the German parliament’s lower house is to vote on a resolution thrashed out by Mrs Merkel’s governing coalition and the main opposition parties.

The EU summit will consider plans to increase the €440bn bailout fund’s firepower by offering government bond buyers insurance against possible losses and attracting capital from private investors and sovereign wealth funds.

The parliamentary resolution stresses that Germany’s liability will remain unchanged, with Berlin still guaranteeing loans of up to €211bn and no more.

Meanwhile, Italian leaders held crunch talks on budget cuts late into the night in a bid to stabilize the Eurozone's third biggest economy.

Italian premier Silvio Berlusconi is fighting to get his coalition government to authorise new austerity measures being demanded in return for financial aid.