Specifically, the money in the EFSF would be used as a kind of insurance for loans taken out by member nations – but the Germany taxpayer would not be obliged to put in more money into the till.
The approval bolsters Merkel as she prepares to journey to Brussels, Belgium to meet with other European leaders to hammer out some kind of agreement to tackle the Eurozone debt crisis.
Dow Jones reported that out of 596 MPs who cast ballots, 503 voted in favor of the resolution, 89 voted against it, and four members abstained.
Merkel’s resolution also calls for major banks to boost their core capital to 9 percent by June 2012.
In addition, German politicians also seek to end the European Central Bank's (ECB) program of buying up Eurozone bonds on the open market to boost weaker euro-zone members and also call for the ECB to be more independent from political considerations.
MPs also will request that Merkel to introduce a financial transaction tax that would be applied across the EU.
Earlier, Merkel had pleaded with the Bundestag to approve her proposals.
“The fundamental weaknesses and holes in the construction of the economic and monetary union must either be addressed now or, I say, never, she told German MPs. And if we address them now, then we will have seized the opportunity this crisis presents us. Otherwise we will have failed.”
Merkel’s had previously been frustrated in her discussions over the rescue fund because a Constitutional Court in Germany had ruled last month that Parliament should have a greater say in bailout discussions.