Saturday

3rd Dec 2022

Sighs of relief as German court approves bailout fund

  • The euro climbed to a four-month high against the dollar on the Karlsruhe ruling (Photo: Valentina Pop)

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

"This is a good day for Europe and a good day for the euro," European Parliament chief Martin Schulz said as the common currency hiked to a four-month high against the US dollar and European shares climbed on the ruling pronounced in Karlsruhe.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

The verdict rejected the request to block ratification of the two treaties establishing the European Stability Mechanism - a €500bn strong bailout fund for struggling eurozone countries - and the so-called fiscal compact on budget discipline, a treaty signed in March by all EU countries except Great Britain and the Czech Republic.

This means the German president can complete the ratification process, allowing for the ESM to come into force in October, after three months of delay.

The eight judges will deliver a complete verdict in December on all the complaints, which compromise some 37,000 plaintiffs.

But they have requested that a €190bn cap be put on Germany's ESM contribution (most of which represents liabilities, not actual cash). If increased, the German Parliament (Bundestag) needs to approve it first.

Members of the Bundestag also need to be informed about what the ESM does with the money, despite a confidentiality agreement signed by ESM board members, which include German finance minister Wolfgang Schaeuble. The principle of democratic accountability has to be upheld, the court said.

Eurogroup chief Jean-Claude Juncker "took note" of the decision and said he plans to convene the first meeting of the ESM's board of governors on 8 October in Luxembourg. Germany is the last country still to ratify the ESM.

As for the treaty on fiscal discipline, it will not come into force earlier than 1 January 2013, Juncker said.

But Guntram Wolff, an expert with the Brussels-based economic think-tank Bruegel, estimates that the Karlsruhe verdict may take longer to implement, because the two demands - the €190bn cap and the confidentiality issue - need to be "binding in international law".

"My first reaction would be that this probably cannot be done by just agreeing in the German implementation law that the conditions are met. It may require changes in the ESM treaty or a new side treaty to the ESM. So my suspicion is that it will significantly delay the implementation of the ESM," Wolff wrote in an emailed statement.

Eurozone to launch new rescue fund

Eurozone finance ministers meeting in Luxembourg Monday will hold the inaugural session of the permanent bailout fund , which is to have a firepower of €500bn by next year.

Swedish EU presidency: 'Ukraine, Ukraine, Ukraine'

Ukraine and a looming economic recession is set to dominate the upcoming Swedish EU presidency, which takes over at the start of next year. Sweden's ambassador to the EU, Lars Danielsson, laid out some of its priorities.

French official accused of conflict over EU fish lobby job

A senior French official is being accused of conflicts of interest for spearheading a leading role in Europeche, a fishing-industry lobby group based in Brussels. The hire comes as the EU Commission threatens a lawsuit against France over fishing.

Portugal was poised to scrap 'Golden Visas' - why didn't it?

Over the last 10 years, Portugal has given 1,470 golden visas to people originating from countries whose tax-transparency practices the EU finds problematic. But unlike common practice in other EU states with similar programmes, Portugal has not implemented "due diligence".

Stakeholders' Highlights

  1. Nordic Council of MinistersCOP27: Food systems transformation for climate action
  2. Nordic Council of MinistersThe Nordic Region and the African Union urge the COP27 to talk about gender equality
  3. International Sustainable Finance CentreJoin CEE Sustainable Finance Summit, 15 – 19 May 2023, high-level event for finance & business
  4. Friedrich Naumann Foundation European DialogueGender x Geopolitics: Shaping an Inclusive Foreign Security Policy for Europe
  5. Obama FoundationThe Obama Foundation Opens Applications for its Leaders Program in Europe
  6. EFBWW – EFBH – FETBBA lot more needs to be done to better protect construction workers from asbestos

Latest News

  1. EU must break Orbán's veto on a tax rate for multinationals
  2. Belarus dictator's family loves EU luxuries, flight data shows
  3. How Berlin and Paris sold-out the EU corporate due diligence law
  4. Turkey's EU-funded detention centres ripe with abuse: NGO
  5. In green subsidy race, EU should not imitate US
  6. EU Commission proposes suspending billions to Hungary
  7. EU: Russian assets to be returned in case of peace treaty
  8. Frontex leadership candidates grilled by MEPs

Join EUobserver

Support quality EU news

Join us