Merkel Victory as German Court Backs Euro Rescue Fund

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The New York Times
Thursday, September 13, 2012

Merkel Victory as German Court Backs Euro Rescue Fund

By NICHOLAS KULISH and MELISSA EDDY

KARLSRUHE, Germany — The Federal Constitutional Court in Germany gave Chancellor Angela Merkel a significant victory on Wednesday in her bid to master the debt crisis that has buffeted the Continent for years and endangered its common currency, granting approval to one of the main pillars of her strategy.

With the ruling, the 17 European Union countries that use the euro will be able to move ahead with the establishment of the European Stability Mechanism, something like a Continental version of the International Monetary Fund. The mechanism will handle bailouts and work in tandem with the European Central Bank to buy the bonds of countries like Italy and Spain that are straining under high interest rates.

The court ruled that Germany could proceed with its contribution to the mechanism, but it set certain conditions, including a requirement for parliamentary approval of any increase in the agreed-upon German contribution of 190 billion euros, or about $240 billion.

The fund, with $644 billion, is intended to buoy struggling countries and help protect the common currency, an impossible mission without Germany, which has the European Union’s largest economy. Although the ruling is unlikely to still Europe’s economic crisis entirely, a rejection could have unleashed new waves of instability and thrown the fitful march toward European integration into question.

“Once again, Germany today sends a strong signal out to Europe and the world beyond,” Ms. Merkel told Parliament. “Germany is decisively true to its responsibility in Europe as the largest economy and a reliable partner.”

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Referendum on Europe Gains Support in Germany

The following is an excerpt from an article in 

The New York Times
Sunday, August 19, 2012

Referendum on Europe Gains Support in Germany

By MELISSA EDDY BERLIN — It has become the buzzword of the summer in Berlin: referendum. The foreign and finance ministers as well as opposition leaders have all come out in favor of allowing Germans to have a direct say in whether to give up more power to European Union institutions.

Although the idea of a referendum is for the moment more notional than concrete, it is gaining currency in Germany’s political debate. Approving it would amount to the exceptional step of a national vote to change the Constitution to allow Germans to relinquish some executive authority to Brussels.

Proponents say that if such a referendum were approved, it would send a strong signal of Germany’s commitment to the euro. It would also streamline the steps needed to save the common European currency, they argue, and appease mounting complaints by Germans that even as they are being asked to pay more to bolster or bail out their troubled euro zone partners, they have no say in where their taxes are flowing or how they are being spent.

Such a referendum comes with the built-in risk that Germans could vote against Europe, with potentially damning consequences for the common currency and the future of the European Union.

Chancellor Angela Merkel has consistently promoted a vision of “more Europe” as the answer to the euro crisis, meaning tighter integration but also stricter oversight of European fiscal policy. Currently, steps in that direction have ended up in Germany’s highest court, facing legal challenges from opponents who say that handing over more money and authority to the European Union violates the country’s Constitution.

On Sept. 12, the high court is poised to rule on the constitutionality of the fiscal pact arduously negotiated among European Union members that is the cornerstone of Ms. Merkel’s plans. It will also rule on the legality of Germany’s $27 billion commitment to back up a permanent bailout fund for the union.

Should the challenge prevail, and German support be withdrawn, it would almost certainly doom the project of greater integration and send a potentially calamitous signal to financial markets looking for urgent steps to buttress troubled euro zone economies. Both measures passed the German Parliament by a clear two-thirds majority on June 29, but they were immediately challenged in court by dissenting lawmakers, delaying them from taking effect as envisioned on July 1.

Proponents of a referendum argue that changing the Constitution would avoid such delays, and the frustrations that accompany them.

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