Chancellor Angela Merkel headed to a summit to solve the euro debt crisis armed with the endorsement of the German parliament as Italy’s Silvio Berlusconi struggled to meet Europe’s demands to cut pension spending.

“The world is watching Europe and Germany,” Merkel said in a speech today to the lower house in Berlin, the Bundestag. “It’s watching whether we’re ready and able in the hour of Europe’s deepest crisis since the end of World War II to accept responsibility.”

Merkel was speaking during a debate on plans to scale up the rescue fund before she traveled to Brussels for the second crisis summit in four days. As the contagion threatens Italy, European leaders are tightening the screws on Berlusconi to bring concrete reforms to the meeting. The summit talks “won’t be easy,” Merkel said.

The 17-nation euro gained 0.3 percent to $1.3965 as of 3:18 p.m. in Berlin. The benchmark Stoxx Europe 600 Index advanced 1.1 percent.

The chancellor ensured cross-party support in the Bundestag to increase the effectiveness of the European Financial Stability Facility fund after persuading the main opposition Social Democrats and Greens to sign up to a motion that included a cap on German guarantees. Lawmakers voted 503 in favor of the motion to 89 against; four abstained.

‘Broad Mandate’

“The chancellor will travel to Brussels today bolstered by a clear and very broad mandate from the German Bundestag,” Peter Altmaier, the deputy parliamentary leader and chief party whip of Merkel’s Christian Democratic Union, said in an interview on Deutschlandfunk radio.

Merkel told lawmakers that the financial risk inherent in the 440 billion-euro ($612 billion) backstop is “acceptable,” and that bondholders must give Greece a bigger break to relieve the debt load at the heart of the turmoil sweeping Europe.

The primary goal of the summit is to lower Greece’s debt level to 120 percent of gross domestic product by 2020, according to the chancellor.

“That can’t be done unless the private sector bears a considerably higher share of the burden” than the 21 percent cut in Greek debt holding envisaged at a July 21 summit of European leaders, she said.

German backing for the scaled up EFSF is still just one piece in the crisis-fighting jigsaw puzzle being assembled. Agreement is still lacking on how to bolster the fund, reductions in Greece’s debt load and recapitalizing banks.

‘Turning Point’

The crisis summit “is a turning point today because it has the right elements,” Carsten Brzeski, an economist at ING Group in Brussels, said in an interview with Francine Lacqua on Bloomberg Television today. “Nevertheless, there is a fatigue on financial markets listening to politicians always coming up with the ultimate, final plan.”

The Bundestag exercised powers over budgetary matters that it won last month after complaints by coalition lawmakers they were being steamrollered into accepting decisions made in Brussels affecting German finances.

“We’re all in new territory,” Merkel said.