Berlin: Chancellor Angela Merkel's pledge to do "whatever is needed to support the euro" faces opposition from German lawmakers anxious about committing more taxpayers' money to helping Europe's most indebted nations.

As European policymakers debate ways to halt the crisis that has sent the cost of insuring European sovereign debt to a record, lawmakers in Merkel's coalition parties are occupied by considerations closer to home: fighting elections in seven of Germany's 16 states this year that start in less than six weeks.

"I would certainly expect significant resistance if an expansion of the rescue umbrella were to be suggested," Norbert Barthle, the budget spokesman for Merkel's Christian Democratic Union and its CSU Bavarian sister party, said in an interview.

The chancellor has been here before. She resisted aid for Greece before an election in Germany's biggest state last May, then insisted on "very stringent conditions" for a bailout. It didn't spare her party from defeat, a result that cost her control of the federal parliament's upper house, the Bundesrat, where state administrations are represented.

"It's a very thin line to walk for Merkel," Carsten Brzeski, an economist at ING Groep NV in Brussels, said in an interview.

"At least under the surface, there is this anti-European sentiment" among the German public.

Merkel may be shifting her stand toward more support for indebted nations after bailouts for Greece and Ireland, budget cuts in Portugal and Spain and a deal to create a permanent crisis-resolution system for the euro failed to calm bond markets.

She indicated yesterday that Germany may be open to changing the terms of the ¤440-billion ($577 billion) rescue fund and was due to hold talks on the euro with International Monetary Fund (IMF) managing director Dominique Strauss-Kahn.

Any increase in EU aid to highly indebted countries is opposed by 62 per cent of Germans, while 32 per cent support it, according to a December 14-16 poll for ZDF television. The FG Wahlen poll of 1,421 people has a margin of error of as many as 3 percentage points.

Merkel "can't take the German parliament for granted," Hans Michelbach, a coalition lawmaker with the chancellor's CSU allies, said in an interview.

Germany would have to win "very convincing" commitments from other euro-area countries to rein in debt if she intends to expand the bailout fund set up in May after the Greek rescue, Michelbach said.

"There is definitely a red line for us."

European governments are considering aid for Portugal, debt buybacks, lower interest rates on rescue loans and guarantees against excessive debt as part of a package to stem the debt crisis, four people with direct knowledge of the talks said yesterday.

‘Whatever is Needed'

"We will do whatever is necessary and everything will be discussed step by step," Merkel told reporters in Berlin. "We support whatever is needed to support the euro, also with respect to the rescue fund."

She declined to be more specific. Merkel was responding to remarks by EU Economic and Monetary Affairs Commissioner Olli Rehn, who called yesterday for a "comprehensive" plan to contain the sovereign debt crisis. His proposals included an expansion of the "size and scope" of the EU's rescue fund.

Merkel said as recently as Dec. 6 that she saw "no need" to top up the fund. She didn't repeat that stand yesterday.

Last year in April, on the day that Greece called for activation of an aid package, Italy's Finance Minister Giulio Tremonti warned that Germany wouldn't be safe if the "fire" from Greece's fiscal woes spread to the rest of the region.

‘They Are Learning'

"They are learning and they are changing their position," Brzeski said. "We've all learned that if one country takes the bailout package, it does not mean that the contagion and speculation stops."

Portugal staged a successful bond auction yesterday, helping bolster the euro, which has lost about 10 percent against the U.S. dollar over the past year. The euro climbed 0.8 percent to $1.3083 at 12:18 p.m. in New York, from $1.2974 yesterday, advancing above the 200-day moving average.

At her press briefing, Merkel said that the fund's "volume is far from being used up," with Ireland the sole country to tap it after Greece received a separate aid package.

"Beyond that I'll say that Germany will do whatever is necessary so that the euro remains stable," she said. "That's our joint currency, from which Germany has profited a great deal."