German lawmakers on Thursday, Sept. 29, overwhelmingly voted to extend the powers of the euro-area rescue fund, throwing their support behind frantic efforts to contain the continent's sovereign-debt crisis.

The Bundestag, or Germany's lower house of parliament, voted 523 to 85 to empower the €440 billion ($599 billion) European Financial Stability Facility (EFSF) to buy bonds of distressed states and offer emergency loans to governments. It also will increase Germany's contribution to the fund to €211 billion in guarantees from the current €123 billion.

While the result is seen as a key a political victory for German Chancellor Angela Merkel, who didn't have to rely on opposition votes to get the EFSF, analysts said she faces an uphill battle in her attempt to steer the Europen response to the crisis.

"Today's vote is important, but there are still many questions that need to be answered particularly about Germany's role in Europe," said Raoul Ruparel, a London-based analyst with the Open Europe think tank. In particular, he says Merkel faces a tough time convincing her counterparts to revise the €109 billion, second Greek bailout package to force private holders of Greek bonds to take bigger losses.

"The tough choices for Merkel are just beginning," Ruparel said.

The vote failed to galvanize equities, with Germany's DAX index down 0.3% by early afternoon in Frankfurt, and the FTSE100 in London down 0.8%. The euro held earlier gains against the dollar and was up 0.5% against the U.S. currency by early afternoon.

Merkel resisted calls to make the poll a vote of confidence on her coalition government where her conservative Christian Democrat party rules with the pro-business Free Democrats, or FDP. The FDP have lost a string of regional elections, calling into question Merkel's ability to govern with an unpopular partner.

Instead, Merkel promised and successfully won approval for the expansion of the stabilization fund with a "chancellor majority" - a majority from members of her own government. Although popular abroad, Merkel has come under fire at home for abruptly changing the course of her government - at the start of her term, she extended an end to nuclear power only to rescind the extension following the Fukushima disaster.

Germany is also staunchly against the euro-zone becoming what it calls a transfer union - a club where members support each other financially. The government has opposed euro-zone bonds and wants the ECB to stop buying European government bonds - two top German central bankers left the European Central Bank over the issue.

As the largest euro-zone economy, Germany is the largest single contributor to the fund, through loan guarantees rather than cash. That means that if Greece, Ireland or Portugal repay their loans to the fund, Germany and other countries will make money rather than lose it.

In his State of the Union speech to EU lawmakers Wednesday, European Commission President José Manuel Barroso also spoke of the need to strengthen the EFSF.

"The EFSF must immediately be made both stronger and more flexible," he said, a move proposed by the Commission earlier this year and endorsed by euro-area heads of government and state on July 21. Once the agreement is ratified, the EFSF will be able to deploy precautionary intervention as well as step in to support the recapitalization of banks, he said.

Expanding the fund requires approval in all 17 euro-zone countries. Nine so far have thrown their support behind expanding the fund's firepower, including Italy, Spain, France and, most recently, Finland. Estonia is also set to vote today, followed by Austria and Germany's upper house of parliament, the Bundestag, tomorrow.

U.S. President Barack Obama had harsh words for European leaders early this week, criticizing their response so far to the debt crisis.

"Some of the challenges that we've had over the last several months actually have to do with the fact that, in Europe we haven't seen them deal with their banking system and their financial system as effectively as they needed to," Obama said during a roundtable discussion at the White House.

Later, White House press secretary Jay Carney said that the administration has been in touch with European top-level policymakers, urging them to "take forceful and direct action to deal with the crisis."