Attacks increasingly getting sophisticated due to the rise of AI, expert says
The Federal Constitutional Court’s decision allows President Joachim Gauck to sign off on the German parliament’s ratification of the treaty that sets up the European Stability Mechanism bailout fund — a financial weapon that that leaders of the 17 countries that use the euro hope will help calm the debt crisis that threatens the eurozone and the global economy.
The decision means the eurozone governments finally have two robust financial defences against the debt crisis in place. The bailout fund will takes its place alongside plans by the European Central Bank to buy unlimited amounts of short-term government bonds issued by troubled countries.
The ESM can support countries by loaning them money, while the ECB bond purchases could lower the painfully high borrowing costs that are threatening Italy and Spain. Additionally, the ESM is also expected to join in purchasing bonds to support the ECB effort.
Stocks across Europe rallied strongly on the ruling, the euro spiked to a four-month high of $1.2906 and the borrowing rates of troubled economies, such as Spain and Italy, eased further.
European officials said the fund now expects to hold its first directors’ meeting next month. Chancellor Angela Merkel welcomed the court’s decision. “Today, Germany is once again sending a strong signal to Europe and beyond: Germany is assuming with determination its responsibility as the biggest economy and as a reliable partner in Europe,” she told Parliament in Berlin hours after the ruling.
“This is a good day for Germany and it is a good day for Europe,” she said. The ESM wouldn’t have been able to start work without Germany, its No. 1 contributor.
The court did, however, insist that Germany has to secure legal guarantees that Parliament must vote on any further increases in its contributions to the ESM. These guarantees must be secured before Gauck signs the fund into law — though that did not appear likely to be a major issue.
Opponents — including several politicians and a pressure group that claimed 37,000 people had signed up to its complaint — had challenged Germany’s ratification of the ESM, arguing it violated the country’s constitution. They had sought an injunction preventing Gauck from signing the legislation — and also sought unsuccessfully to block the so-called fiscal compact, the budget-discipline pact pushed by Merkel and signed by most European Union countries.
Gauck’s office said in a statement that he plans to make a decision on signing the legislation into law “as soon as possible” but it isn’t yet possible to specify a date.
The court’s decision came just days after the European Central Bank unveiled a plan to buy government bonds of struggling countries if they apply to the eurozone’s bailout funds.
Yet both the ESM and the ECB bond purchases are stopgaps. They can give governments time to reduce their deficits and cut debt long-term by reforming their economies so they can grow faster. The question is, whether the countries will use that time — or delay once the pressure is off, as they have during previous lulls in the crisis.
“Within less than a week, the eurozone has finally received its long sought-after impressive bazooka,” said Carsten Brzeski, an economist with ING in Brussels.
Germany is liable for about 27 per cent — about €190 billion — to the overall European bailout program totalling €700 billion, which includes the ESM and remaining money from the current temporary fund, the European Financial Stability Facility.
The supreme court’s chief justice, Andreas Vosskuhle, said the case posed “special challenges” — not least because the financial and political consequences of a possible delay were “almost impossible to estimate reliably.”
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