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European Court green-lights ESM bailout fund

The EU's top court has ruled that the permanent bailout fund created earlier this year does did not violate EU law. An Irish parliamentarian had questioned the legality of creating the European Stability Mechanism (ESM).

Green light for the Euro in Germany's financial stronghold of Frankfurt 13 November. The looming changeover to euro banknotes and coins across the 12-nation euro zone on January 1, 2002, has left US investors uninspired and blase, expecting the event to have little impact on the curency's fundamentals. US analysts said there may be potential for some temporary disruption in economic activity in the euro area related to the switchover, which could hit the euro's foreign exchange value, but this would be unlikely to last beyond a few days. dpa

Grünlicht für das Euro-Rettungsfonds

The EU's Luxemburg-based Court of Justice ruled on Tuesday that the way in which the ESM was established had not violated EU law. That had been asserted by Irish parliamentarian Thomas Pringle when he originally brought the case before the Irish Supreme Court.

The Irish court had referred the matter to the EU Court of Justice. Pringle had claimed, among other things, that when the European Council made the decision to create the ESM, it had overstepped its bounds by not organizing a convention of national parliaments, heads of state, or the European Parliament.

The decision to create the ESM amounted to an amendment to the EU's Treaty on the Functioning of the EU (TFEU), the court said.

The European Council made up of representatives of the bloc's 27 nations was entitled to do this without consulting a convention, the court said, if the matter was related to internal polices and actions of the EU, and as long as the competences conferred in the EU treaties were not increased.

ESM creation legitimate, says court

The court's written decision read, the ESM amendment did not "encroach on the exclusive competence held by the EU in the area of monetary policy" for eurozone members, since the "ESM pursues an objective which is clearly distinct, namely to safeguard the stability of the euro area as a whole." Any affects the ESM may have on monetary policy, the court said, were indirect.

The ESM was inaugurated in October as a successor to the European Financial Stability Facility (EFSF), a temporary fund created in 2010 for bailouts for struggling eurozone countries such as Greece.

The ESM can lend up to 500 billion euros (649 billion dollars).

Anti-bailout advocates in Germany had held up the launch of the ESM by challenging the measure before Germany's constitutional court. Its judges cleared the ESM too but on the condition that Germany's liability be capped.

mz/ipj (dpa, dapd)