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Constitutional Court approves euro rescue

Published: 12 Sep 2012 10:29 GMT+02:00
Updated: 12 Sep 2012 12:33 GMT+02:00

"This is a good day for Germany, this is a good day for Europe," said Chancellor Angela Merkel in a speech to parliament after the keenly anticipated ruling.

In a landmark ruling watched around the world, the Constitutional Court overturned a raft of legal challenges aimed at preventing President Joachim Gauck from signing two crucial crisis-fighting tools into law.

Delivering a momentous decision with far-reaching implications for the euro's future, the eight scarlet-robed judges said Gauck could finally sign the European Stability Mechanism (ESM) and fiscal pact.

"The Second Senate of the Federal Constitutional Court has rejected the injunctions with the stipulation that a ratification of the ESM Treaty is only admissible if (certain conditions) can be guaranteed under international law," Chief Justice Andreas Voßkuhle said.

"Our examination has shown that the laws with a high probability do not infringe upon the German constitution. That is why we have rejected the injunction," he added.

The ruling came on a day of risks for the euro, which has enjoyed calmer times in recent weeks, as an anti-austerity party is seen likely to score big gains in Dutch elections and EU leaders unveiled plans for the first step towards a eurozone banking union.

It will come as an enormous relief to Chancellor Angela Merkel and her fellow European leaders as a rejection of the ESM would have triggered a fresh bout of chaos on financial markets and thrown the eurozone into a new political crisis.

The constitutional court specified that any financial burden for Germany arising from the ESM be strictly limited to its share of the fund's capital or €190 billion ($244 billion).

If the burden were to increase beyond that amount, then it could only be done with the express approval of the German parliament, and both the upper and lower houses must be kept fully informed, the court said.

The professional secrecy to which the fund's employees were bound "must not stand in conflict with the Bundestag and Bundesrat being comprehensively briefed," the statement said, referring to the lower and upper chambers.

The court also ruled that Germany must ensure a de-facto opt-out clause, if it felt its interests were not being considered.

"The Federal Republic of Germany must make it clear that it does not want to be bound to the ESM Treaty as a whole if any reservations it might have should prove ineffectual," Voßkuhle said.

The €500-billion ESM was set to replace the temporary European Financial Stability Facility (EFSF) and should have been in place by July 1.

But it needed Germany's share of the rescue money to function and had thus been held up pending the court ruling.

It is designed to come to the aid of debt-stricken countries such as Spain and Italy.

Technically, the court ruling was solely on whether to grant applications for temporary injunctions by eurosceptic politicians and groupings and delay ratification of both the ESM and the fiscal pact.

It will decide only at a later date whether the two are compatible with the German constitution, and that ruling could take several months yet.

Nevertheless, the court did provide some strong guidance as what that final ruling might look like.

The plaintiffs included the Left party, an initiative called More Democracy including 37,000 citizens and an outspoken critic from the Bavarian sister party of Merkel's conservatives, Peter Gauweiler.

They had argued that the ESM and the fiscal pact were incompatible with Germany's Basic Law because they irreversibly delegate national sovereignty to the European level and interfere with parliament's right to draw up budgets.

Moreover, this was all being decided without the necessary democratic backing, they complain.

But the court said such arguments were "unfounded". There was no such democratic deficit and the stability-orientated framework of currency union remained intact, it argued.

And "the possibility of setting up a permanent stability mechanism does not lead to a loss of national budgetary autonomy because the Bundestag has not yet transferred budgetary competence to organs of the EU or its institutions," it argued.

AFP/hc

The Local (news@thelocal.de)

Your comments about this article

11:01 September 12, 2012 by Zubair Khan
In current scenario a logical decision by the court. Will inject new blood to the sick body of euro zone countries. May also prove savior for the crippling Greece. Merkel Government must be relieved of immediate threat of Euro collapse.As a stop gap arrangement might be decision is OK and great but in the long run economists have to re examine their monetary and fiscal policies which are totally interest and capitalism oriented. These policies are not helping fair distribution of wealth and resources amongst needy human beings. Gap between haves and haves not is constantly widening. With such policies now danger can be avoided for indefinite time.
14:27 September 12, 2012 by delvek
In the long run, the EU is not possible. It remains incredible to me that the proping up with unaccounted funds continues.
16:53 September 14, 2012 by luckylongshot
Europe made a mistake agreeing to the Euro in the first place. It offered no obvious benefit as modern technology means trading in multiple currencies is not a problem. What it did was switch from a situation where the central bank could be forced to either give its profits to the state (America) or was owned by the state (Japan and China) to one where the Rothschilds benefit rather than European taxpayers.. Furthermore the Europeans are now on the hook in a very nasty game that seems to be heading towards taking control of countries away from elected officials and giving it to unelected bureaucrats. While I had hoped that the court would put a stop to more of this madness this was not the case and it was given a green light.

The last hope is that the people wake up to their looming enslavement and use their votes to put an end to it by electing anti Euro political parties
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