German court backs eurozone's ESM bailout fund

German Constitutional Court judges - file pic The judges want a guarantee that Germany's financial liability will not rise

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Germany's top court has rejected calls to block the permanent eurozone rescue fund - the European Stability Mechanism (ESM) - and the European fiscal treaty.

Leader Angela Merkel called it "a good day", while markets rallied in relief.

But the Constitutional Court imposed conditions including a cap on Germany's contribution, which it said could only be overruled by the German parliament.

Critics had argued that the ESM commits Germany to potentially unlimited funding of debt-ridden eurozone states.

Some 37,000 people had signed a petition to the court asking it to block the ESM, and make it subject to a referendum.

Since Germany is due to contribute 27% of the fund, it cannot proceed without German ratification.

But, after weeks of deliberation, the court's Chief Justice Andreas Vosskuhle said it "rejected the injunctions", since there was a "high probability" that the ESM did not violate the constitution.


You could see the relief clearly: charts for stock prices jumped the moment the judgement was made public.

The positive sentiment was as much about what didn't happen as what did. If the panel of judges had blocked the ESM, there is little doubt that it would have halted the bailouts of eurozone countries in difficulty, and financial markets would have taken it badly.

The judgement, though, is qualified. The most significant string attached is that any raising of Germany's contribution could only be done with the full consent of parliament.

In the current political climate, there would be much opposition to any more money from Berlin. A recent poll showed that more than half of Germans wanted the judges to block the ESM, so there is no mood for digging deeper into pockets, should it be necessary.

However, he said ratification of the treaty could only be allowed under certain conditions.

He continued: "No rule of the treaty must be interpreted in a way which would result in higher payment obligations by Germany, without the consent of the German representative."

Correspondents said that meant that any future increase in the size of the 500bn-euro (£400bn) fund, or of Germany's contribution, could only be permitted with the express agreement of Germany's parliament.

When added to the money already committed to the existing temporary fund, Germany is liable for about 190bn euros.

'Smart decision'

The decision clears the way for Germany's President, Joachim Gauck, to sign the ESM and the fiscal pact - which is meant to enforce budget discipline - into law.

Correspondents said there would be huge relief in Brussels and European capitals at the verdict.

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The institutions that seem to be most keen to put control over the future of the euro into the hands of the voters are the ones that are least accountable to them”

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"Today, Germany is once again sending a strong signal to Europe and beyond: Germany is assuming with determination its responsibility as the biggest economy and as a reliable partner in Europe," Chancellor Merkel told parliament in Berlin hours after the ruling.

"This is a good day for Germany and it is a good day for Europe," she said.

Spanish, Italian and German share indexes all rose after the ruling, while the euro continued its recent gains to post a hit a new four-month high against the dollar, at $1.29.

The borrowing costs on Spanish and Italian 10-year bonds fell.

Analysts suggested that, combined with European Central Bank plans to buy the government bonds of struggling countries, Europe now had the tools it needed to combat its financial crisis.

"Within less than a week, the eurozone has finally received its long sought-after impressive bazooka," said Carsten Brzeski, an economist with Dutch bank ING.

"As a result, eurozone governments have now received more time to do their homework, implement reforms and austerity measures," he said.


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  • rate this

    Comment number 83.

    Merkel does not have much time to build the support she requires -- this can only come from other EU and Euro countries if the German public are to be ´soothed´

    -- High Frequency Trading, Transaction tax etc. are also in her sights.

    --she again out-lefted the ´left´-- while ´her Right leaning´ CDU clapped and squirmed.

    -- she obviously plans to ´be around´ for some time to come.

  • rate this

    Comment number 82.

    On the question of hwether or not the German public will stomach further bail outs would those of you saying "look at how the German public are reacting" please keep up to speed.

    They were mostly against bail outs to start with. But as the truth about the benefits to them has slowly come out public opinion is slowly but surely shifting behind doing what it takes to keep the Euro alive......

  • rate this

    Comment number 81.

    The court had no choice as a no vote would have caused an almighty panic. If the euro fails then the UK can kiss goodbye to any hope of a recovery for a decade. We may not be in it but it's in our interests to keep the EZ stable until a viable long term solution can be found.

  • rate this

    Comment number 80.

    The only country that gains from the Euro this was a no brainer that they were going to agree with the bailout. without the rest of europe in a mess the Germans would be struggling.

  • rate this

    Comment number 79.

    @59.James London

    I and I believe most don't see any signs that this will be the last bail out required to prevent a default within the eurozone or answer the currently trendy euro scepticism.

  • rate this

    Comment number 78.

    @ 59 Jim London

    What you fail to grasp is that the "Eurosceptics" were correct.

    They said that the €uro was doomed without fiscal and political union. This happened - it was fact.

    What is now happening is that the €uro is being saved by a slow and stealthy move to fiscal and political union, without ANY mandate from the people.

    Very predictable. Very undemocratic. It's the EU way.

  • rate this

    Comment number 77.

    "German court backs eurozone's ESM bailout fund"


  • rate this

    Comment number 76.

    "Personally I am glad this nonsense chatter about the euro collapsing is coming to an end as"

    Excellent comment .... I guess the end is still nigh then ? :-) and so now maybe we can invest in a positive future.

  • rate this

    Comment number 75.

    the collapse of the euro and the eu would save the uk a fortune.......all us uk mugs are paying for people like that bulgarian family who get a council house and benefits for 9 of them in 3 weeks.......and all us mugs are paying for it......what a shxx system we have.

  • rate this

    Comment number 74.

    Glad to see that it's not only our judges that wear daft suits......

  • rate this

    Comment number 73.

    The ´game´ is on-going. Merkel´s speech was brilliant, she explained the complexities-- and why she should be trusted --maybe it works.

    This is NOT ´kicking the can ´.

    At the ´Draghi´ conference, it was very strange that ONLY Weidmann protested -- this meant that ALL Northern participants supported the Bond buying.

    --or did I miss something ?

  • rate this

    Comment number 72.

    24.Toby Chambers
    "Hooray the markets Are up on the news as If the almighty market is the only thing that matters...As long as We can keep The Market happy"
    You'd be happy if someone offered you £20k for your 2002 Ford Fiesta.
    Unfortunately that person is us the taxpayer.

  • rate this

    Comment number 71.

    # 59.James London
    Personally I am glad this nonsense chatter about the euro collapsing is coming to an end as it provided a good vehicle for the small minded xenophobes in England & the US to attack Europe
    Had the Titanic not hit the iceberg we would still believe the ship was unsinkable. Nothing to do with xenophobia, the Euro is sinkable without solidarity & of that we've seen little.

  • rate this

    Comment number 70.

    Did hear Barosso statement 'A federation of nation states' Not possible a federation of states can exist (USA) but not nation states, A Condfederation of nation states can exist . ?

  • rate this

    Comment number 69.

    #41 I'm scared of UKIP because your former leader on BBC Breakfast stated 'I don't see why the NHS needs to employ anyone other than doctors and nurses' (no cleaners, no scientists, no secretaries, no catering staff, no-one in payroll, no car park attendents, no pharmacists, no one maintaining the building fabric..... ) Thats a pretty scary level of ignorance.

  • rate this

    Comment number 68.

    64.Mike Solomons - "...or is Germany crippled if they don't?"

    For all the small contribution to the crisis by over spending Greek politicans etc the bulk of the damage was done by a lack of transfer of funds from those benefitting from the Euro (mainly German) to those struggling with it (Greece et al).

    Germany can afford the bail out several times over.....

  • rate this

    Comment number 67.

    #41 we have failed havnt we.......printing money to survive .......ripping off pensions and savings...... unregulated mass immigration ...we certainly havnt succeeded. scred of ukip are we? good......because were on or way.

  • rate this

    Comment number 66.

    As suspected --there is a two-track system devised by Merkel and Draghi.

    Info is out that Weidmann (Bundesbank) wanted that the ESM funds be used first, before the bond buying begins. That was rejected. The bond buying has few rules attached and unlimited --so Rajoy can truthfully say -- HE will determine the conditions.

    -- The bonds `problem´ will be discussed LATER by the Supreme Court.

  • rate this

    Comment number 65.

    The Euro is saved Hooray ! Now all the politicians can go back to giving away vote winning vouchers to their debt addicted electorate.

    A round of white elephants for everyone. The chap in lederhosen is picking up the tab.

  • rate this

    Comment number 64.

    I worry what might happen in a few years time when the bailout funds fall due to be repaid, (remember, they're actually loans at loanshark rates).

    Put another way, when major countries have to repay Germany large amounts of money provided at crippling interest rates, do they cripple themselves to do it, or is Germany crippled if they don't?

    I fear the result whichever way it goes.


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