German Courts Approve Legality of EU Bailout Funds

The highest court in German upheld a 2012 ruling on Tuesday, confirming the legality of the euro zone’s new, permanent crisis defense mechanism.

The 700 billion euro ($974 billion) European Stability Mechanism (ESM) is a crisis fund which replaced the temporary European Financial Stability Facility (EFSF). The fund issued bonds at the height of the euro zone sovereign debt crisis in 2012. The proceeds were lent to troubled countries under a bailout program.

The ruling – which was widely anticipated by market watchers – means that German taxpayers’ ESM liability must be limited to 190 million euros.

Making loans to struggling euro zone nations or buying up bonds in debt markets, this euro zone fund was initially given a fast-track ruling by the court back in 2012 after eurosceptics questioned whether it conformed to German law. Two caveats placed on the fund were that the Bundestag lower house had the powers to veto it and that it could ensure limited liability for German taxpayers. Both rulings were confirmed by the constitutional court on Tuesday.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza