Wednesday, September 12, 2012

Germany limits the European Stability Mechanism

Germany's consitutional court ruled today that Germany may participate in the European Stability Mechanism, but with strict limits and conditions. The ESM is the permanent fund meant to prop up finances in some of the euro zone's countries.

Condition one is a cap on Germany's contribution at 190 billion euros. No salami tactics in which the commitment becomes larger.

Condition two is full consultation with the German parliament on an ongoing basis. This means the terms of the loans and the compliance with the terms.

Condition three is a new treaty to write those conditions down. Even a modification of the existing treaty is a new one, so that is clear.

These conditions mean that those opposed to the ESM's establishment will not get their way entirely. But they will have it in their power to make the recipients of ESM funds wish they had. Those in Germany that want to cut off Southern Europe entirely will have to settle for cutting them down to size. They will now have the tools do so with all their might. And Europe will suffer again.

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