Germany’s Highest Court Just Made a Major Ruling Regarding the EU’s Massive New Bailout Fund
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.
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.
Follow Becket Adams (@BecketAdams) on Twitter
The Associated Press contributed to this report. All photos courtesy AP.
- Shock Video Surfaces: Meat Cleaver-Wielding Man Shouts ‘You People Will Never Be Safe!’ Moments After Gruesome London Attack 512 Comments
- Why Were DHS Agents Seemingly Monitoring Multiple Tea Party IRS Protests Across the Country on Tuesday? 460 Comments
- Confusion Erupts in IRS Hearing After Lois Lerner Tries to Plead the 5th — Watch It All Unfold 445 Comments
- CNN’s Wolf Blitzer Has Awkward Moment With Okla. Tornado Survivor After Asking If She ‘Thanked the Lord’ 324 Comments
- The Tense Exchange Between Rep. Trey Gowdy and the Former IRS Head You’ve Been Waiting for…and It Doesn’t Disappoint 323 Comments
- Ariz. Lawmaker Surprises Colleagues, Comes Out as an Atheist While Delivering Daily Prayer Read More
- This Is How Texas Politicians Are Fighting Against the Atheist-Led ‘War on Christmas’ Read More
- ‘Unbelievable’: Apparent Thief Leaves $140 & Apology Note on Family’s Doorstep — Find Out Why Read More
- Anti-Gay Bias or Fair Punishment? New Details Emerge About High School Student’s Lesbian Relationship With a Minor 253 Comments
- Comedian’s New Anti-Muhammad Video Excoriates Islamic Prophet, Juxtaposes Him with Jesus: ‘Very Wrong and Twisted’ 146 Comments
- House Votes to Speed up Keystone Pipeline: Here’s Everyone Who Voted for and Against It Read More
- Here are the 7 Most Explosive & Informative Moments from Today’s IRS Hearing Read More
- Foreign Banks Operating on U.S. Soil Have Just Set a Record Read More
- Report: No IRS Workers Have Been Disciplined & Union Says It Hasn’t Been Contacted on Personnel Read More
- The Incredible Role Facebook Played in the Aftermath of Devastating Okla. Tornado Read More
- Tech Company Demonstrates Remote Disabling of a ‘Smart Gun’ 116 Comments
- Meet the Blind Man Nicknamed ‘Midnight Gunslinger’ Who Has 80% Shot Accuracy Read More
- How a $4.5 Million Network of 181 Sirens Helped Save Lives in Oklahoma Twister Read More
- See the Record-Setting Python a Man Caught With His Bare Hands (and Guess How Much It Weighed) Read More
- Colorado killer's reprieve sharply criticized
- Taiwan's Wu confirms he'll run for IOC presidency
- US, Israel raise hopes for Mideast peace restart
- Jury in Jodi Arias trial resumes deliberations
- Nixon library hosts 40th reunion for Vietnam POWs
- Bangladesh: Owners' many failings led to collapse
- UK emergency committee meets after attack
- Birth control coverage up for federal appeal