ESM verdict: euro bailout not unconstitutional – Constitutional Court judge

Wednesday, 12.09.12 , written by Anja Schlicht The decision on the case against the ESM has been dropped. The Constitutional Court in Karlsruhe ruled today Wednesday that the ESM does not violate the Basic Law. Thus, Germany can ratify the rescue package as the last Euro-country. International 

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The Federal Constitutional Court in Karlsruhe has spent a long time deciding on the ESM – three months. But not wrongly. Because a lot was at stake, not least the future of the Eurozone. As expected by legal experts and even the plaintiffs, the eight constitutional judges, chaired by Andreas Voßkuhle, have dismissed the claim that the ESM violates the Basic Law.

Verdict on ESM fallen-demanded

However, the verdict on the euro rescue package is subject to conditions: the German liability limit must be clearly defined. At present, Germany’s share of the rescue package is 27 percent. With a total volume of 700 billion euros, which equips the ESM for rescuing financially troubled euro states and banks, this amounts to a total of 190 billion euros. So far, however, the ESM also provides that the Federal Republic in an emergency, for example, if other euro countries can not pay their share, must pay more money. Therefore, the Constitutional Court requires a limitation of liability to the 190 billion euros and the regulation that no provision of the ESM without the consent of German representatives may be interpreted differently, so that the limitation of liability can be bypassed. Another edition of the court refers to the fact that under certain circumstances the Federal Government may not be bound by the ESM.

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Feared power loss of the Bundestag

The plaintiffs, including 37,000 citizens in the name of the association “Mehr Demokratie”, the Left and the CSU deputy Peter Gauweiler, had turned to the Constitutional Court, as they saw the control rights of the Bundestag in danger. Through the ESM, the EU Commission and the ECB have the opportunity to circumvent the design and control rights of the Bundestag elected by the people. The plaintiffs demanded that citizens vote before tax money is transferred to EU bodies.

Consequences of a veto of the Constitutional Court

If the constitutional judges had vetoed the ESM and thus prevented the final adoption of the euro rescue package, would be in the opinion of Finance Minister Wolfgang Schäuble (CDU) “significant economic upheavals with unforeseen consequences” the consequences. Some countries would collapse under the debt burden and enormous cuts in debt would follow, which could have a very negative impact on the European financial system. Finally, even the end of the euro zone is possible. Therefore, the decision of the Federal Constitutional Court was not surprising in view of the fact that everything was at stake.

Constitutional complaint against ESM nevertheless successful for plaintiff

The plaintiffs considered their action despite the defeat in court as success. Without their intervention, the ESM would have come into force on 1 July 2012, the conditions now imposed would never have existed. The ESM can now be set up in the course of October to replace the EFSF as planned.

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