German Chancellor Angela Merkel’s court victory on policy for saving the euro was hailed by southern Europe as well as her northern allies as German bailout critics failed to stop the joint currency’s permanent rescue fund.
With an extension of Greece’s bailout still undecided and Spain holding out on seeking a sovereign rescue, today’s German constitutional court verdict avoids worsening the debt crisis as it approaches its third anniversary. It also hands Merkel ammunition against domestic opponents who see German taxpayers’ money at risk in the name of a united Europe.
Once set up, the Luxembourg-based ESM will form a crisis-fighting tandem with the European Central Bank after ECB President Mario Draghi offered to buy sovereign bonds on the secondary market to reduce borrowing costs for countries such as Spain and Italy. Spain’s 10-year benchmark bond fell to 5.57 percent from 5.69 yesterday, compared with 7.17 percent before Draghi’s announcement.
Rajoy’s hesitation prompted a warning from Germany. The Spanish government can’t bet on avoiding conditions if he seeks more aid from Europe’s bailout funds, said Michael Meister, a senior lawmaker from Merkel’s Christian Democratic Union party.