Germany’s parliament resoundingly approved the eurozone’s permanent bailout scheme and new budget rules on Friday, but legal hurdles remain and German Chancellor Angela Merkel’s concessions to eurozone partners Italy and Spain may make those harder to overcome.
The outcome of the vote was never seriously in doubt after opposition parties agreed to back the budget rules, or “fiscal compact,” in return for growth and job creation measures. Merkel needed their support to get a required two-thirds majority.
“Today Germany, with the approval of the fiscal pact and the ESM [European Stability Mechanism] by all parties in both houses of parliament, will send an important signal ... that we are overcoming the European debt crisis in a sustainable way,” Merkel told the lower house, the Bundestag, before the votes.
Merkel had returned for the debates and the vote from an EU summit in Brussels that agreed to give the eurozone’s bailout funds more flexibility to stabilize bond markets and to directly recapitalize banks in the future.
The upper house, the Bundesrat, also later gave its seal of approval to both pieces of legislation. However, German President Joachim Gauck has said he will not sign them into law until Germany’s powerful Constitutional Court has given its go-ahead.
Ratification of the two tools for combating the debt crisis may also force Germany to test its commitment to Europe in a referendum as anger grows over aid to weaker countries.
Merkel said the deal at the EU summit to use the rescue funds to ease Spanish and Italian borrowing costs without extra austerity measures, and to recapitalize banks directly, did not violate her mantra of no aid without conditionality.
However, it could exacerbate impatience with the bailouts in Germany, which has no big Eurosceptic party, but where Merkel’s center-right coalition includes a small, but vocal, band of rebels who voted “No” to the ESM in the Bundestag on Friday.
Klaus-Peter Willsch, a member of the Bundestag from Merkel’s Christian Democrats (CDU), said the concessions would result in “Germany being liable for everyone.”
While backing the fiscal compact on Friday in return for government concessions on economic growth, opposition parties repeated their criticism of Merkel’s emphasis on austerity measures, saying they had exacerbated the euro crisis.
“I only hope the growth initiatives have not come too late,” Sigmar Gabriel, chairman of the center-left main opposition Social Democrats (SPD), told the Bundestag.
“We are voting ‘Yes’ [to the fiscal pact] because Europe is more important than party political rivalries,” he said.
The bailout scheme cannot come into effect without German backing as it needs approval by countries making up 90 percent of its capital base. This has now been put back to July 9, with only a handful of the eurozone’s 17 countries having complied.
However, Germany risks missing the second deadline too, due to the need for the backing of the Constitutional Court, which has slapped the government’s wrist before for taking short cuts on European policy.
This could take weeks. In a series of rulings since 2009, the court in Karlsruhe has expressed reservations about the steady transfer of power to Brussels, and affirmed the right of Germany’s parliament to vet decisions taken at European level.