Germany and the Euro Rescue Agreements

In 2010 EU Member States agreed to economic aid (so-called ‘bailouts’) to help Greece and Ireland, and also to a future permanent bailout system, the European Stability Mechanism (ESM), for Member States that have adopted the euro. In May 2010 the European Financial Stability Facility (EFSF) was created within the framework of the Ecofin Council. In July 2011 an additional €109 billion aid programme for Greece was agreed which will run until the end of 2014. The support programme included measures to expand the flexibility of the EFSF.

German agreement on the bailout mechanisms has been unpopular in Germany and the Chancellor, Angela Merkel, has suffered setbacks in two recent state elections. Her euro policies have also led to divisions within the CDU-led coalition government. The Government faces important parliamentary votes at the end of September on the new expanded EFSF.

On 5 July 2011 the German Constitutional Court began deliberations on legal challenges launched in 2010 by the Bavarian conservative politician, Peter Gauweiler, and a group of professors, as to whether the German Government acted lawfully in committing money to the bailout of Greece and whether the EFSF and ESM are compatible with German law.

On 7 September 2011 the Constitutional Court rejected as unfounded the constitutional complaints about the German and EU legal instruments and other measures in connection with aid to Greece and the euro rescue package.

Following more complaints to the Federal Constitutional Court about the legality of the German laws on the ESM, the President has not signed them into law and the Court intends to examine the issues in detail.

This Note looks at German political and public views of the euro rescue package and the new ESM mechanisms.