The eurozone crossed a vital hurdle yesterday in its drive to adopt crisis tools, helped by a preliminary German court ruling but anger over austerity hit the streets in Spain.
The last-minute complaint to Germany’s Constitutional Court had argued that the ECB’s new bond-buying programme was an illegal monetarisation of debts
The German Constitutional Court rejected a last-minute legal challenge by a eurosceptic politician and said it will issue today its main decision on whether German President Joachim Gauck can sign into law the European Stability Mechanism (ESM) and the European fiscal pact.
The main decision today is seen in the EU and on global markets as a crucial moment for the eurozone.
In addition to that ruling, the Dutch go to the polls with an anti-austerity party set to score big gains and EU leaders are to unveil plans for the first step in creating a eurozone banking union.
A decision today to hold up Germany’s participation in the €500 billion ESM bailout fund and the pact obliging countries to cut their deficits would negate the strategy elaborated by European leaders to overcome the debt crisis.
It could lead to a new spike in market tensions after a calm restored by the European Central Bank’s decision last week to launch a new bond-buying programme.
The last-minute complaint to Germany’s Constitutional Court had argued that the ECB’s new bond-buying programme was an illegal monetarisation of debts.
It had sought a ruling on that issue before a decision whether the ESM and fiscal pact are an illegal transfer of budgetary sovereignty under Germany’s Basic Law.
While the thought exposing Germany’s public finances to unlimited risks should one eurozone country after another topple under the debt crisis has inflamed German concerns, having to make repeated cutbacks may be inflaming separatism
A thousand buses from across the northeastern Spanish region of Catalonia carried supporters to Barcelona for the region’s national day, or Diada, with a slogan: “Catalonia, a new European state.”
Fiercely proud of their distinct language and culture, Catalans increasingly feel they are getting a raw deal from Madrid.
Last month, the region reached out for a €5 billion central Government rescue so as to make repayments on its €40 billion, equal to a fifth of its total output.
The central Government in Madrid, which is trying to squeeze the country’s overall deficit back into EU limits, has deman-ded regions make huge cuts to public services.
Catalonia, which accounts for one-fifth of the Spanish economy, says it pays the central Government far more in taxes than it receives in return – some €7 to €8 billion euros a year – and wants the power to raise and spend its own taxes like the neighbouring Basque Country.
Meanwhile, Finnish Prime Minister Jyrki Katainen backed Spain in its “unfair” financial crisis and said he would not pressure it to seek a full sovereign bailout.
With expectations high that Spain will seek a full-blown bail-out from Europe, Spanish Prime Minister Mariano Rajoy said on Monday that he would not accept any economic bailout that dictates spending cuts or touches old-age pensions.
Katainen, a strict defender of fiscal discipline who was a tough player in July negotiations for a eurozone rescue loan to Spain’s banking sector, said he would not dictate to Rajoy what areas to make cuts in.
Meanwhile, Greece struggled to find €11.5 billion in spending cuts over the next two years in order to unlock €31.5 billion of bailout loans it needs to stay afloat.
In a speech to German law-makers, Finance Minister Wolf-gang Schaeuble hailed “substantial progress” made by Greece in cutting its debt mountain but urged Athens to stick to its promises if it wanted to receive much-needed fresh aid .