BERLIN (Washington Post) — The European Union breathed a huge sigh of relief Wednesday after a German court ruled Berlin’s approval of taxpayers’ cash to aid its deeply indebted neighbors was not unconstitutional, paving the way for a rescue fund considered vital to containing the region’s debt crisis .
But the notoriously activist judges of the Constitutional Court also set certain conditions, including one insisting that German liability to the $640 billion fund - to which Berlin is contributing about $245 billion - could not increase without parliamentary approval.
Nevertheless, the decision marked a victory for Europe’s financial rescue plan in a region desperately trying to contain a debt crisis that has rocked global markets for nearly three years. The much-anticipated ruling had loomed large over the continent, reminding observers of the legal and political challenges to rapid crisis management in a currency union made of 17 distinct nations, each requiring ratification of action plans through their own peculiar and often arcane rules.
A judgment against German aid for its neighbors could have thrust Europe into a far more dangerous stage, upending years of diplomatic teeth pulling to establish the fund. It could additionally have thrown a wrench into plans announced last week by the European Central Bank to buy up the debt of troubled nations in a quest to bring down their hazardously high borrowing costs - a plan that explicitly counts on the establishment of the bailout fund, known in the bureaucratic parlance of Brussels as the European Stability Mechanism.
As it was, the ruling - though not without its caveats - boosted European markets, which had been worried about the immediate threat of the region’s biggest benefactor having its hands tied by the court. The decision was being hailed by Germany’s ruling coalition led by Chancellor Angela Merkel, for whom a rejection of the ESM would have presented a massive new obstacle.
“This is a good day for Germany, and this is a good day for Europe,” Merkel told German lawmakers on Wednesday. “Germany is sending once again a strong signal out to Europe and beyond it.”
The ruling came on the same day as voters in neighboring Holland were going to the polls, with pro-euro parties looking set to win, albeit after a race that highlighted just how distrustful many Europeans are about ceding national authority to the region’s administrative capital in Brussels. Punctuating how regional integration is accelerating as a result of the crisis, EU officials on Wednesday outlined plans for a previously announced banking union that would see national regulators forfeit ultimate authority over the region’s 6,000 financial institutions to the European Central Bank.
That kind of integration is troubling many in Europe, leading to the rise of nationalist parties and attempts by opponents to throw up obstacles. Indeed, the German ruling on Wednesday came as the result of a legal challenge seeking to block lawmakers from allowing frugal German taxpayers to foot the lion’s share of the bill to aid their troubled neighbors.
The decision on Wednesday, made in an atmopshere of theatrical drama by the court’s eight red-robed judges, amounted to a ruling on requests for an injunction to the ESM, which were denied. The decision, though, cleared the way for German President Joachim Gauck to technically ratify the ESM treaty, which was approved by the German parliament in June. However, experts were divided about how he must comply with the court’s decision, which could potentially mean adding a new clause to the German ratification documents that would then need to be passed on to officials in Brussels.
Jean-Claude Juncker, head of the euro zone’s group of finance ministers, issued a statement Wednesday saying that, given the court’s decision, the first official board meeting of the ESM fund would be called for Oct. 8.
In addition, the court also gave a green light to Germany’s participation in a fiscal treaty enshrining enforceable budgetary discipline on the 25 European Union nations that signed it in January.
Though a defeat to those seeking to hinder German aid to its neighbors, the court’s message that politicians here must act carefully not to breach the constitution in committing aid also appeared to offer a dim light for euro skeptics who want a historic referendum on the euro in a country where polls show a good portions of Germans pining for the days of the Deutsche Mark.
One poll released last week indicated 54 percent of those asked were hoping the court would block the establishment of the rescue fund, with only 25 percent hoping it would rule in favor.
“Even if I am a little disappointed, we have really done something for democracy today,” Gregor Gysi, head of Germany’s Linke Party which filed one of the suits seeking to block the ESM, told Germany’s ARD Public Television.