Green light to ESM: 'The hurdle has been taken up, but the race is long'

Germany’s top Constitutional Court has ruled that the €500 billion bailout is legal under German law, but analysts say it’s too early to breathe a sigh of relief, because most points of friction between member-states are still in place.

The highly anticipated verdict is handing a victory to Chancellor Angela Merkel, who was supportive of the European Stability Mechanism (ESM).The Federal Constitutional Court ruled Germany’s 190 billion euro contribution can’t be increased without legislative approval. The court said Germany can ratify the ESM if it includes binding caveats it won’t be forced to assume higher liabilities without its consent.Despite Chancellor Angela Merkel attempts to calm the German people by saying, the Constitutional Court's ruling provided security for German lawmakers and taxpayers, the 500 billion euro bail out might be enough to guarantee stability.“The court had no other option but to say yes because otherwise a negative decision would have destroyed the Eurozone, and lead to a global depression”, risk consultant John Hulsman told RT. "Italy and Spain are going to need more than the €500 billion put aside. Spain will certainly need a bailout. Greece will probably need a third bailout. The court cut German liability to €190 billion, which sounds like a lot of money, but frankly it's not, given the money they are going to need to rescue indebted neighbors. At some point somebody at the Bundestag needs to get up and say: its madness, we can no longer pay for the rest of Europe. So yes they took up the hurdle but it's a very long race”, Hulsman concludes.After German lawmakers approved the ESM and the fiscal pact 37,000 people signed a petition against the bail out plan which was reviewed by the court.“There are still a lot of points of friction. The European Court said that everything up until now is fine but they also said there can be no unlimited liability, meaning that this can't go on forever, and that they are not going to be bailing out everyone else in Europe. There’s still a very long way to go in the crisis: the countries in the South can't be on life support and the countries in the North can't pay for them forever. And the discrepancies are already emerging with the Finns saying that Greece should probably leave the euro, and the Dutch doubting they should give more money as their pension payments could now be cut,” John Hulsman concludes.