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07 September 2011

FT: German court upholds eurozone rescue


Germany's constitutional court has rejected a series of challenges to the eurozone financial rescue packages agreed last year for Greece and other debt-strapped members of the European currency union.

The court also ruled that in future the budget committee of the Bundestag must give its prior approval before any further German financial guarantees for loans to its 16 partners in the eurozone.

Andreas Vosskuhle, president of the second chamber of the constitutional court in Karlsruhe, said it was “a very close decision”.  “It should not be mistakenly interpreted as a constitutional blank cheque authorising further rescue measures”, he said.

Carsten Brzeski, senior economist at ING Belgium, said the decision did not amount to a green light for any future rescue package. “Today’s ruling should bring some relief to financial markets as a total chaos scenario has been avoided, but it should not lead to euphoria”, he said. “A bigger say for German parliament in future bailouts could easily find copycats in other eurozone countries, undermining the clout of the beefed-up EFSF, as well as the permanent European Stability Mechanism to be established from 2014", he added. He said that the ruling should clear the way for the Bundestag to approve the new reforms to the EFSF at the end of September.

Full article (FT subscription required)



© Financial Times


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