The German government says Chancellor Angela Merkel's Cabinet has approved the European Union's new permanent bailout fund, paving the way for it to be brought before both houses of Parliament for a vote.

According to AP, the Cabinet on Wednesday, March 14 approved the German contribution to the so-called European Stability Mechanism of some euro22 billion ($29 billion) in cash and loan guarantees of up to euro168 billion.

The ESM is to have an overall capacity of euro500 billion and the plan is for the current European Financial Stability Facility to stop operating once it comes into force this summer. The European Commission, the International Monetary Fund and some countries want the two funds to run in parallel to boost lending capacity.

The German participation is expected to be voted on in Parliament at the end of March.