Tue, Sep. 18, 2012

Approval of Eurozone Bailout Fund

AH - Washington.   On September 12, 2012, the German Federal Constitutional Court in Karlsruhe ruled the participation of Germany in the European Stability Mechanism and the Fiscal Compact to be constitutional.

As the last member state of the European Union, Germany has now cleared the way for the implementation of a system of permanent financial help for countries with financial troubles in the eurozone. Since member states representing 90% of capital stock payable to ESM institutions need to ratify the ESM and Germany is about to contribute 27% of the fund, the ratification in Germany is necessary for the ESM to come into effect.

While the ruling in the matter 2 BvR 1390/12 delivers an important pro-European message to bailout skeptics, the Court imposed several conditions on the ratification by Germany. Most importantly, as a binding condition under international law, the German liability may not exceed 190 billion euros without the prior consent of the German parliament.


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