Sunday

23rd Jul 2017

EU court to hear Irish complaint on bailout fund

  • Architectural maquette of the EU court building in the Grand Duchy (Photo: Cedric Puisney)

The EU court in Luxembourg will on Tuesday (23 October) hold its first hearing on an Irish challenge to the EU bailout fund, the European Stability Mechanism (ESM).

Based in a small office in Luxembourg, run by a German economist, free from political or judicial oversight and set to dole out €500 billion of taxpayers' money to floundering eurozone countries and banks, the ESM came into life on 8 October in a meeting of euro-area finance ministers.

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It has already survived one challenge in Germany's constitutional court and one in Ireland.

But the Irish government ratified the ESM treaty and is to pay its first installment of €500 million into the pot next week despite the Irish judges' referral of three questions to the EU tribunal.

The questions - put by the Cork, Ireland-based law firm Noonan Linehan Carroll Coffey on behalf of independent Irish MP Thomas Pringle - revolve around conformity with the EU treaty.

The first query is whether EU countries were right to tweak EU law on permanent bailout structures back in 2011 by using a "simplified procedure" - envisaged for minor technical changes - instead of by holding a full-blown intergovernmental conference.

The second one is whether the ESM violates the so-called "no bailout" clause, article 125, of the EU charter.

The final question is whether eurozone states were right to already ratify the ESM even though the tweaked-version EU treaty only comes into force on 1 January.

If the EU judges rule against it, the ESM, its ratification and any payments made to Luxembourg will be deemed illegal.

The EU court has fast-tracked its judgment in order to "remove uncertainty" on the "financial stability of the euro area" and pundits expect it to say No to Pringle.

But in a sign of strong interest in the case, Irish think tank the National Platform has noted that over a dozen countries as well as Ireland filed papers to the tribunal.

The ESM is galling for the Irish public because eurozone hawks, such as Germany and Finland, have said it cannot help on old bank debt - the main problem facing the Irish exchequer.

"Ireland's total commitment [to the ESM] is in excess of €11 billion. By contrast, there is no fixed commitment by the ESM to support Ireland," National Platform said in a statement.

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Markets and EU politicians breathed sighs of relief as Germany's top court rejected challenges brought against the eurozone's upcoming bailout fund. Any increase in Berlin's contribution will need parliamentary approval, however.

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EU officials are in damage control mode after Germany, Finland and the Netherlands said the eurozone's new bailout fund should not take on old debt from bad banks.

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The ESM, the eurozone emergency fund, agreed on Friday to unblock a new tranche of aid as part of the bailout programme agreed upon in 2015.

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