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Germany 'Confident' Court Will Back Fiscal Compact

by Ulrika Lomas, Tax-News.com, Brussels

13 July 2012


Germany’s coalition government has underlined its confidence that the Federal Constitutional Court will rule that the permanent euro rescue mechanism, the European Stability Mechanism (ESM), and the fiscal compact, aimed at achieving greater fiscal discipline in Europe, are in accordance with the constitution.

The announcement follows negotiations that took place recently in the Federal Constitutional Court on emergency applications opposing both the ESM and the fiscal treaty, submitted by the Left Party and by former Federal Justice Minister Herta Däubler-Gmelin.

The swift setting up of the hearing and the discussions in Court confirm that the decision is of great importance for the stability and the future of the eurozone in particular and for the European Union (EU) as a whole, the government has emphasized.

The fiscal compact and the European Stability Mechanism are important steps on the path towards a European stability union, the government said, underscoring that their integral relationship is a basic condition for overcoming the crisis. Both instruments represent the principle that “solidarity and solidity belong together”, the government added.

The government stressed in its statement that in its view the contested laws are compatible with Germany’s basic law and in no way violate the democratic rights of either the plaintiffs or members of parliament or parliamentary parties.

Although Germany’s Bundestag (lower house) and Bundesrat (upper house) voted in favour of the fiscal compact and the ESM by the necessary two-thirds majority at the end of June, the laws are only formally ratified once Federal President Joachim Gauck has given his endorsement by signing the treaties.

The Court has requested, however, that Federal President Gauck refrain from signing the laws until the deliberations have been completed and a decision given.

In a surprise turn of events, Gauck welcomed the submission of the emergency applications, insisting that the appellants were right to express their concerns, and called for a broad social debate on the issue.

Lamenting the lack of communication surrounding the situation in the eurozone, Gauck also underlined the need for German Chancellor Angela Merkel to explain in detail to the nation plans to rescue the euro and to clarify the full fiscal implications of these plans.

The ESM will only enter into force once it has 90% of its capital, namely once the eight states providing the largest share of capital have ratified the treaty. Due to provide around 27% of the ESM capital, Germany is the largest contributor.

TAGS: tax | economics | fiscal policy | law | Germany | currency | European Union (EU) | Europe

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