Germany approved yesterday a massive Greek aid package despite popular anger, two days before a state poll that could hinder Chancellor Angela Merkel in passing legislation so easily in future.
"(The Bill) towards greater security for the euro was passed today with a large majority. This is a very important decision that makes clear that we will protect the single currency for our citizens," Mrs Merkel told reporters.
"But it will only be effective in combination with the ambitious Greek austerity programme approved yesterday (Thursday) by the Greek Parliament," she warned.
Both houses of Parliament earlier approved the Bill before President Horst Koehler signed it into law late yesterday, allowing Mrs Merkel to attend an EU summit in Brussels with the legislation in place.
"We must defend the stability of the common European currency. That is what this is all about," Finance Minister Wolfgang Schaeuble said, adding there was "great uncertainty among people and on financial markets, not just in Europe."
Germany is set to provide €22.4 billion in loans to Greece over three years, the largest eurozone contributor to a €110-billion package from the EU and the International Monetary Fund.
The deal has failed to soothe markets, with the euro hitting a 14-month low against the dollar and Japan and Australia expressing concern.
Opinion polls have shown a majority of German voters oppose lending the money to Greece, but Mrs Merkel's coalition had enough votes in both houses to ensure it would pass - for now.
A tight race in tomorrow's legislative election in North Rhine-Westphalia, Germany's most populous state, could result in Mrs Merkel losing her majority in the upper house, eight months after winning a second term.
Mass-circulation daily Bild has dubbed the aid "the fattest cheque in history". The latest survey showed 56 per cent of voters thought providing aid to Greece was wrong.
A group of eurosceptics who tried to stop Germany adopting the euro in 1998 filed an injunction yesterday saying the aid contravenes EU regulations.
"A bottomless pit has been opened," said Joachim Starbatty, a retired economics professor from the University of Tuebingen and a member of the group.
But Mrs Merkel's government has said it is confident the challenge will fail.
Mrs Merkel, who has also been accused in Germany and abroad of dragging her feet over aid to Greece and thereby exacerbating the crisis, wants an EU summit starting yesterday to get the ball rolling on giving fiscal rules more teeth.
Mrs Merkel and French President Nicolas Sarkozy issued a joint statement on Thursday ahead of the Brussels talks calling for a new "robust framework" for policing public finances.
But Sigmar Gabriel, head of the opposition Social Democrats (SPD), accused Mrs Merkel of "catastrophic failure" and of doing "long-lasting damage to confidence in the credibility of Germany's European policy".
The centre-left SPD, until last year Mrs Merkel's coalition partners, abstained in yesterday's vote because the Bill did not oblige banks to contribute to the aid.