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.