News Column

Germany Finally Ratifies ESM Bailout Fund

Sept. 27, 2012
euro bills

Germany ratified Thursday the treaty to establish the eurozone's new high-firepower bailout fund, the European Stability Mechanism, after a three-month legal wrangle.

President Joachim Gauck signed the ratification in Berlin, his aides said. Germany, the biggest net contributor, had been the last of the 17 eurozone states to ratify.

A vote by eurozone finance ministers on October 8 will now open the 500-billion-euro (650-billion-dollar) ESM for business.

Spain, which needs to recapitalize its banks, is expected to be its first client.

EU diplomats said the 17 eurozone ambassadors to Brussels had agreed Wednesday to a pledge that no member state could be forced into "payment obligations higher than (their) portion of the authorized capital stock" in the ESM, thereby satisfying a key German qualification.

Germany had originally passed legislation to adopt the ESM at the end of June, but it was challenged by anti-bailout groups.

The country's constitutional court ruled on September 12, clearing the treaty but demanding qualifications that Germany's liability be capped and its parliament be given access to potentially confidential ESM information.

Those riders were adopted Wednesday by Chancellor Angela Merkel's cabinet and swiftly approved in Brussels.

Opponents then mounted a vain last-minute appeal. Supporters of Peter Gauweiler, a maverick conservative federal legislator, complained to the court that the qualification did not meet court requirements to modify the ESM treaty.

But judges quickly ruled that it was "not evident" to them that the rider was in conflict with the court's September 12 verdict.

The court had ruled that Germany could not be held liable, without parliamentary approval, for more than the 190 billion euros (245 billion dollars) already pledged.

The technical, but friction-free, modification to satisfy the court demands had been expected, following an announcement by Jean-Claude Juncker, the chairman of the Eurogroup of eurozone finance minsters, at an informal meeting in Nicosia two weeks ago.

Source: Copyright 2012 dpa Deutsche Presse-Agentur GmbH

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