Germany: Top court approves euro zone bailout fund
(From L to R) These effigies in the likeness of German Vice Chancellor and Economy Minister Philipp Roesler, German Chancellor Angela Merkel and German Social Democrats (SPD) Chairman Sigmar Gabriel were part of a publicity campaign by the Initiative Neue Sociale Markwirtschaft critical of German spending policy. Germany’s upper house of parliament is scheduled to vote on Friday whether to ratify the European Stability Mechanism (ESM), the permanent bailout scheme for the euro zone.
Germany's top court has approved the euro zone's contentious new bailout fund – dismissing a raft of legal challenges, Deutsche Welle reported.
In handing down the highly anticipated ruling, the Constitutional Court in Karlsruhe also capped Germany's contribution to the European Stability Mechanism (ESM), saying this could only be overruled by the German parliament.
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The fund is worth 500 billion euros, and today's decision means that any increase in its size, or Germany's contribution of 190 billion euros, will require the agreement of the Bundestag, The Guardian reported.
After months of deliberations by the court, the German President Joachim Gauck is now cleared to sign the legislation into law.
The euro currency this morning rallied on the news of the fund's approval, hitting a new four-month high against the dollar, at $1.29. Analysts say the decision may mark a turning point in the euro zone debt crisis.
The BBC reported that tens of thousands of Germans had signed a petition asking the court to block the ESM, amid fears that Germany's funding of indebted euro zone states would be unlimited. Many had called for the decision to instead be put to a national referendum.
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However Chief Justice Andreas Vosskuhle today said: 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.”
From July next year, the ESM will be available to channel emergency funds to support the euro zone's weakest members.