The constitutional court in Karlsruhe has decided that the German participation in the permanent mechanism for bailing out European nations is totally legitimate, but that their participation is limited to 190,000 million euros.
As expected, the German Constitutional Court on Wednesday approved the German participation in the European Stability Mechanism (ESM). The only condition is that Germany will not be an open checking account to rescue all other nations. That condition was the unexpected part of the decision.
The total proposed amount for the fund reaches 700,000 million euros, so theoretically Germany will split that amount with already indebted nations who are keen to provide funds for countries like Spain and Italy, and who are already providing money to other nations such as Greece and Portugal. The word from the court is not the final though, as the 190,000 million euros can be increased to whatever the German Parliament decides is necessary, explained the presiding judge, Andreas Vosskuhle in Karlsruhe.
The use of ESM funds to bailout European nations was initially scheduled for last July, but the need for ratification by at least 90% of participants had not been achieved until Germany issues its support, which has now happened.
Germany had requested some time to study and ratify the ESM last July, so the Constitutional Court could analyze in depth the claims for interim measures made by different social groups, and the party of Eurosceptics who reported that adherence to these treaties involved a transfer of sovereignty and would require the revision of the German Constitution to weaken the supervisory capacity of the German Parliament about money of German taxpayers. The German Court has now approved of such surrender of sovereignty by accepting Germany’s participation in the fund.
The decision by the Court also requires that major decisions have the approval of ESM Bundestag either in full or a through a special committee, just as it happened with the temporary rescue fund. The President of the Board, Andreas Voßkuhle, acknowledged that some discussions were “very intense and complex.” With its decision, Germany will be the last of the seventeen countries in joining the euro rescue fund or ESM.
The impact that this decision has is less complex than the discussions mentioned by Voßkuhle, because the bankers will simply choose to make these so-called difficult decisions in private. In laymen’s terms, all responsibility has now been handed to the European bankers to spend the money of the European people as they please and with unlimited power.
The German Constitutional ruling, which also gave the green light for the Fiscal Pact, has been very well received in the markets. The Spanish risk premium (or yield spread required for Spanish 10-year bonds versus German) has decreased below the 400 basis points (4 percentage points) for the first time since April. The Spanish stock market has shot upward and the euro has also marked its highest against the dollar since May.
This means that the markets still do not understand that more debt will make it things worse. Like a drug addict, government leaders and financial market managers continue to see the consumption of more drugs (debt) as the only solution to the addiction problem.
The ruling will allow the bailout fund to become operational in the short term and therefore it will be seen as a loss publicly for German Prime Minister Angela Merkel, who in public always showed to buying sovereign debt from failing and bankrupt countries. Now, the German president, Joachim Gauck, will have to sign a legislative package that includes the ESM and the fiscal pact, the last obstacle before the fund can begin its operation.
Delivered by The Daily Sheeple
We encourage you to share and republish our reports, analyses, breaking news and videos (Click for details).
Contributed by Luis Miranda of The Real Agenda.
Luis R. Miranda is the Founder and Editor of The Real Agenda. His 16 years of experience in Journalism include television, radio, print and Internet news. Luis obtained his Journalism degree from Universidad Latina de Costa Rica, where he graduated in Mass Media Communication in 1998. He also holds a Bachelor’s Degree in Broadcasting from Montclair State University in New Jersey. Among his most distinguished interviews are: Costa Rican President Jose Maria Figueres and James Hansen from NASA Space Goddard Institute.