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Germany’s Highest Court Just Made a Major Ruling Regarding the EU’s Massive New Bailout Fund

Sep. 12, 2012 1:15pm Becket Adams

The German Constitutional Court Paves Way for the Creation of the ESM Fund

Andreas Vosskuhle, second left, presiding judge of the German constitutional court is flanked by other judges Gertrude Luebbe-Wolff, Herbert Landau, and Peter Mueller (AP)

The German Constitutional Court on Wednesday rejected calls to block the creation of a new €500 billion ($640 billion) rescue fund for indebted eurozone governments.

Why’s this huge for the eurozone?

Because after months on infighting and back-and-forth bickering, Germany’s highest court was the only thing standing in the way of Europe’s massive new bailout fund. And now they are fully expected to approve the constitutionality of Germany’s participation.

The Federal Constitutional Court’s decision allows President Joachim Gauck to sign off on the German parliament’s ratification of the treaty that sets up the European Stability Mechanism (ESM) bailout fund — a financial weapon that that leaders of the 17 countries that use the euro hope will help calm the debt crisis that threatens the eurozone and the global economy.

The decision means the eurozone governments have two bailout funds to help them deal with their debt crisis. This latest bailout fund will take its place alongside plans by the European Central Bank (ECB) to buy unlimited amounts of short-term government bonds issued by troubled countries.

The ESM can support countries by loaning them money, while the ECB bond purchases could lower the painfully high borrowing costs that are threatening Italy and Spain. Additionally, the ESM is also expected to join in purchasing bonds to support the ECB effort.

Oddly enough, one-time austerity champion Chancellor Angela Merkel welcomed the court’s decision.

“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,” she told Parliament in Berlin hours after the ruling.

“This is a good day for Germany and it is a good day for Europe,” she added.

Obviously, without Germany, the ESM wouldn’t have been able to start work.

Chancellor Angela Merkel (AP)

However, if it’s any consolation to anyone, there’s a catch to the court’s decision.

The court insisted that Germany has to secure legal guarantees that Parliament must vote on any further increases in its contributions to the ESM. These guarantees must be secured before Gauck signs the fund into law — though that did not appear likely to be a major issue.

Gauck’s office said in a statement that he plans to make a decision on signing the legislation into law “as soon as possible” but it isn’t yet possible to specify a date.

Germany is liable for about 27 percent — about €190 billion — to the overall European bailout program totaling €700 billion, which includes the ESM and remaining money from the current temporary fund, the European Financial Stability Facility.

The supreme court’s chief justice, Andreas Vosskuhle, said the case posed “special challenges” — not least because the financial and political consequences of a possible delay were “almost impossible to estimate reliably.”

The court still has to deliver a full ruling on the substance of the complaints of the those who oppose the ESM. But Vosskuhle made clear that his court’s ruling on the calls for a temporary injunction — delivered after two months of deliberations — reflected the likely outcome of the case expected early next year.

“The examination showed that the laws that have been challenged with high probability do not violate the constitution,” he said.

Wednesday’s ruling was in line with previous rulings in which the Federal Constitutional Court has approved European political and financial integration, and eurozone rescue measures, while insisting that the German Parliament’s right to have an early and thorough say on them be safeguarded.

Vosskuhle said it wasn’t his court’s job to decide on the “usefulness and sense” of measures approved by a large majority of German lawmakers.

“No one can say for sure what measures are actually the best for Germany and the future of our united Europe in the current crisis,” he said. He insisted, however, that “only as a democratically legitimized community governed by the rule of law does Europe have a future.”

In attaching strings to Germany’s ratification, the court gave some satisfaction to the plaintiffs. Herta Daeumler-Gmelin, a former justice minister who represented some of them in court, said it was important that the court clearly set limits on German liability and reaffirmed Parliament’s right to have a say.

“I am not unhappy with this decision,” she said.

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The Associated Press contributed to this report. All photos courtesy AP.

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Comments (55)

Independent4233
Posted on September 12, 2012 at 3:27pm
MARK………..MY……….Words!

This will be the greatest regret Germany has EVER had to date.

The EU is in crash mode.

Nothing will stgop it.

Slowing down the process, hoping a miracle will stop the implosion during the time that is borrowed is the wish of fools.

As in the US, let natural business cycles work their way to completion. That’s the only way to reach a sound financial basis.

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- JosephMichael
  Posted on September 12, 2012 at 4:26pm
  In other words if a company is going to go bankrupt then they should. Most people scream no to this because of all the jobs that will be lost. In realty, when one company leaves others will take its spot. Anyways, I agree. Fearing that the government needs to bail out these big companies or countries is a joke. Let them… maybe then they will learn their lesson and do it right the next time. Otherwise they will just keep repeating the same mistakes.
  
  Report this comment
- AvengerK
  Posted on September 12, 2012 at 5:38pm
  Germany will do everything to keep the EU intact. Not for benign reasons but for their own advantages. Germany has enjoyed considerable advantages to their exports from the Euro. A return to the Deuschmark would see the value of German currency rise by around 20% and essentially price them out of the export market. They can afford to cut Greece loose but they can’t afford to lose Spain or Italy and the fallout of Greece leaving the Euro would affect both those countries, something the Germans cannot afford. So a moribund Greece is kept on constant life support to keep shoring up Spanish and Italian debt and banks.
  Let’s not forget…France’s punitive taxes on the rich is not having a beneficial effect on their financial woes either.
  Great Britain in a wise move has moved to deregulate it’s over regulated business sector in the hopes that it might spur some economic growth. It may be too little too late especially in light of it’s heavy taxation and over-leveraged health care system.
  Europe is essentially in another recession with record unemployment throughout the continent.
  My bet is even with this decion by the German courts, Brussels and the EU are still two steps behind the problem as they have been throughout this debacle.
  
  Report this comment
- BSdetector
  Posted on September 13, 2012 at 8:47am
  Idiots, they actually decided to go down with the ship rather than save themselves from their parasitic neighbors.
  
  Oh well, more time for us to prep.
  
  Report this comment
ginger100
Posted on September 12, 2012 at 3:18pm
Do you think Germany regrets joining the EU?

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- Jack of Hearts
  Posted on September 12, 2012 at 4:32pm
  Invading Russia yes, joining the EU no.
  
  Report this comment
- AvengerK
  Posted on September 12, 2012 at 5:40pm
  No because Germany has enjoyed a boost in exports thanks to the Euro. This is what this is all about for Germany because a return to the Deuschmark would see the German currency go up around 20% and price them out of the export market. If their exports go down, they join the rest of Europe and go into recession.
  
  Report this comment
- PaulHausser
  Posted on September 13, 2012 at 9:24am
  They invaded the Soviet Union. The had no choice. Stalin was going to attack. All of his units were in offensive positions.
  
  The Germans had em beat. US and English lend lease saved Stalin from defeat. Plus endless endless hoardes of Uzbeks Tajiks Mongolians Siberians and Khazars that were forced onto trains at gunpoint by Stalin’s Commissars to go fight in the West of the Soviet Union.
  
  Germany killed millions of these beasts and would have won it had not the US and England forced them to split their forces. As well as the weak Italians.
  
  Report this comment
kpeters59
Posted on September 12, 2012 at 3:00pm
This is no surprise. It’s just what Glenn laid out 2 or 3 years ago. Watch the dominoes fall.

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CourageousGeorge
Posted on September 12, 2012 at 2:45pm
Hey EU! It will be harder if you keep waiting until later!
All they know is how to postpone the inevitable by months or a year or two at best. Meanwhile Progressives in the U.S. want to be more like Europe. Gotta wonder if they all have the collapse in mind, whistling through the dark alley, or if they’re just dumb.

I am reminded of the German “Reichs-bank-note”s I was given from my grandfather. Everything from ten thousand to one hundred million Deutsch Marks from 1922 and 1923. Inflation was so bad that notes from a few months earlier were literally used as toilet paper or burned since they were cheaper than firewood.

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mcsledge
Posted on September 12, 2012 at 2:33pm
Germany has just signed its own death warrant.

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- Chuck Stein
  Posted on September 12, 2012 at 3:14pm
  Wow: a supreme court acting as a rubber stamp to the legislature. I sure am glad that I live in America.
  
  Report this comment
TRILO
Posted on September 12, 2012 at 2:10pm
Once again banks win, taxpayers get hosed,

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progressiveslayer
Posted on September 12, 2012 at 2:00pm
Those krauts just opened pandoras box and the whole world will pay.Silver & gold are money,fiat currency is worthless.Everybody who thinks silver & gold isn’t money see what your paper with colors on it are worth when we have a global depression.

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- Snowleopard {gallery of cat folks}
  Posted on September 12, 2012 at 2:15pm
  Right now I wonder how much of these funds are provided by Obama directly; and how much Soros will benefit when the Euro tanks.
  
  Report this comment
- progressiveslayer
  Posted on September 12, 2012 at 2:21pm
  We have no money just debt and Ben is printing more debt to seal our fate,Soros will make a killing when the EU implodes of that I’m sure.
  
  Report this comment
- bumfuzeled
  Posted on September 12, 2012 at 3:14pm
  tough to chew and digest that gold and silver, invest in land, food and whiskey to be used to barter for just about anything you need. Keep your precious metals as I have no use for them.
  
  Report this comment
- Chuck Stein
  Posted on September 12, 2012 at 3:41pm
  @ progressiveslayer
  Silver and gold keep it real. But what about other metals? The first paper money in Europe was Swedish — the paper was backed by copper. Why not aluminum certificates nowadays?
  
  Report this comment
Jenny Lind
Posted on September 12, 2012 at 1:52pm
Mom always said “fools and their money are soon parted” We are not the poster country of good spending. If I was a good economist I’d be searching for a cave or deserted island or some high mountain. I’ll settle for a tiny place in a very small town.

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Rothbardian_in_the_Cleve
Posted on September 12, 2012 at 1:51pm
Weimar II

The court did cap the involvement but it won’t matter. They’ll break the cap when they need to as well. All over the globe it is print baby print!!! Hold on to your hats and gold and silver.

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- KevINtampa
  Posted on September 12, 2012 at 1:53pm
  and brass and lead…
  
  Report this comment
caleejr
Posted on September 12, 2012 at 1:50pm
“…a good day for germany”? How is it good that a thriving economy – the most stable economy in the EU – is picking up the tab for other countries’ blatant wasteful spending. What possible good can come to Germany? They will go broke, trying to keep everyone else afloat.

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- KevINtampa
  Posted on September 12, 2012 at 1:53pm
  Merkel likes austerity because it’s Germany who gets to tell the other countries what austerity routes they should take. She likes this ruling because it strengthens Germany’s position in telling other countries how to behave. Last time the Germans took Europe with tanks to impose their governance, this time they are doing it with banks. It would be funny if it wasn’t so damn sad…
  
  Report this comment
- Rothbardian_in_the_Cleve
  Posted on September 12, 2012 at 2:06pm
  There is still the issue of Holland and Austria who have both said that no more of their citizens money will fund southern state bailouts. The ESM can’t buy sovereigns without unanimity. Germany may be punting, but not all of the Euro is there yet.
  
  Report this comment
team1blazer
Posted on September 12, 2012 at 1:50pm
They just kicked the can down the road. Now, when it explodes, it will be a bigger can…and it will affect the US.

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KevINtampa
Posted on September 12, 2012 at 1:50pm
Merkel likes austerity because it’s Germany who gets to tell the other countries what austerity routes they should take. She likes this ruling because it strengthens Germany’s position in telling other countries how to behave. Last time the Germans took Europe with tanks to impose their governance, this time they are doing it with banks. It would be funny if it wasn’t so damn sad.

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thibx
Posted on September 12, 2012 at 1:48pm
corrupt politians and unions destroy countries.

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Larry E
Posted on September 12, 2012 at 1:47pm
It’s good to see that the socialists have NO understanding of finances. Even I understand that when I’m in debt up over my head that borrowing more money is NOT the thing to do. If people are willing to help themselves, and others are able to help them out then fine. However, when the countries who are well over their heads in debt don’t apparently want to change their ways, why should others go further in debt to support them.

The joys of socialism ladies and gentlemen, and exactly where we’re headed. Except that nobody will come along to bail us out.

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huey6367
Posted on September 12, 2012 at 1:44pm
With everything going on in the Muslim world and in Europe, I spy a huge war occurring. I hope I am wrong.

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- Jack of Hearts
  Posted on September 12, 2012 at 4:35pm
  Don’t worry, you’re wrong.
  
  Report this comment
german_viewer
Posted on September 12, 2012 at 1:33pm
“This is a good day for Germany” Chancellor Merkel said.

Honestly, I’ve never heard a more perverted statement from a politician.

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- soybomb315_II
  Posted on September 12, 2012 at 1:43pm
  i have….
  
  “Intelligence gathered by this and other governments leaves no doubt that the Iraq regime continues to possess and conceal some of the most lethal weapons ever devised.”
  -President George W. Bush, March 17, 2003
  
  Report this comment
- NOTAMUSHROOM
  Posted on September 12, 2012 at 1:44pm
  Well then, you haven’t been listening to our guy, President Barak O’Bumbler.
  
  Report this comment
- 13th Imam
  Posted on September 12, 2012 at 2:01pm
  The community of nations may see more and more of the very kind of threat Iraq poses now:rogue state with weapons of mass destruction, ready to use them or provide them to terrorists Bill Clinton 1998
  
  We have KNOWN for years that Saddam is seeking and developing weapons of mass destruction Ted “The Murderer” Kennedy 9/27/2002
  
  Report this comment
- bumfuzeled
  Posted on September 12, 2012 at 3:51pm
  I can do one better Soy…
  
  .. I will faithfully execute, preserve and protect the constitution of the United States of America…
  Barack Obama Jan 2009
  
  Report this comment
floridareader
Posted on September 12, 2012 at 1:27pm
Germany is giving in, yet again. But when the Euro implodes, it’s going to be Germany’s fault, again.

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Sirfoldallot
Posted on September 12, 2012 at 1:26pm
Germany once tried 2 distroy Euro. now they r incharge of the EU ?

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- DimmuBorgir
  Posted on September 12, 2012 at 1:35pm
  destroy or rule?
  
  Report this comment
- Rothbardian_in_the_Cleve
  Posted on September 12, 2012 at 2:01pm
  Why do Germans try to take over Europe? Because they are German.
  
  Report this comment
- TulsaYeeHaw
  Posted on September 13, 2012 at 1:54am
  No Rothbard, not because they are German, but because everyone else seems to be better at sucking……
  
  Report this comment
Detroit paperboy
Posted on September 12, 2012 at 1:25pm
Yeh buddy ! Kick that can………..

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Snowleopard {gallery of cat folks}
Posted on September 12, 2012 at 1:25pm
Say goodbye to the EU and the Eurozone; they just cannot stop the escalating cycle that grows more destructive with each effor tried. Let the euro collapse and reset the area. I have heard Obama has been begging them to try and keep the EU stable until after the elections.

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Lloyd Drako
Posted on September 12, 2012 at 1:25pm
George Soros wll be pleased. This goes a long way toward solutions he has been advocating for Europe for some time.

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woodyee
Posted on September 12, 2012 at 1:22pm
“Katie, bar the doors!”

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13th Imam
Posted on September 12, 2012 at 1:21pm
Suckers

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ZAP
Posted on September 12, 2012 at 1:21pm
(first photo) I thought Halloween wasn’t til October?

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NSDQ
Posted on September 12, 2012 at 1:21pm
So how exactly is borrowing money the answer to debt again? The euro was such a bad idea.

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