New bailout fund given the go-ahead in Germany

The European Stability Mechanism (ESM) is to be a new institution helping EU member states, who find themselves in dire straits financially.

Thus far the bailouts - already given to Ireland, Portugal, Greece - were managed by the temporary aid fund, now left with under half of its lending capacity. The ESM has been in the works since 2010, and were it to prove unconstitutional in Germany, the EU crisis-management would have been sent back to the drawing board.

According to the complaint filed with the German constitutional court, the country’s participation in the ESM meant possible limitation to the sovereignty of the Bundestag, and as it would surrender control of its own finances to EU institutions.

The judges rejected the complaint, as was largely expected. They have, however, specialised conditions for their approval, including:

• Should the German input into the ESM exceed the current amount of 190 billion euro, the Parliament’s approval will be required;
• Both houses of the German Parliament must be kept informed on the ways, in which money from the fund are being spend.

So far the reactions to the ruling have been largely positive. Exchange, although far from euphoric, went up on all major European markets. At 10 am, shortly after the ruling, the Warsaw Stock Exchange noted an increase of 0.29% - up to 2359.68 points.

The euro went up to $1.29 against the US dollar – a new four-month high.

"The Tribunal's decision doesn't come as a surprise," said Agnieszka Lada, director of the European Program at the Institute of Public Affairs, "but it highlights a very important notion - the faith of Europe depends on court decisions right now... Judges are not democratically elected representatives, and although they stand on guard of democracy, they don't have to understand the whole context of each situation."

So far 20 out of 27 EU member states ratified the ESM treaty. Polish Parliament voted it through earlier this year, and Presidential Assent was given by Bronislaw Komorowski in July. (be)