German Industry, Banks and Economists Praise ESM Verdict
Enlarge image The Frankfurt Stock Exchange saw a bounce. (© dpa/pa) Advocates of the European Stability Mechanism (ESM) were not the only people to rejoice in the German Constitutional Court’s verdict in its favor. Critics, like the Association of Taxpayers and the president of the Ifo Institute for Economic Research, Hans-Werner Sinn, welcomed the boundaries that the judges placed on the financial measure.
The German stock market saw a bounce, but no euphoria ensued. The DAX’s initial jump to its highest mark this year – 7,410 points – directly after the verdict declined as the day went on. At 3:30 p.m., the index stood at 7,360 points. The euro also initially rose to 1.2936 against the dollar, before it fell back under $1.29.
To German industry, this verdict means a cleared path toward reducing the federal debt. “Industry is happy that guardrails have been put in place,” said the president of the Federation of German Industry, Hans-Peter Keitel. President of the Confederation of German Employers’ Associations Dieter Hundt spoke of a strong, pro-European signal.
Banks applauded the verdict as well: “The European Union and the euro zone have, with the ESM and the fiscal pact, convincing tools for a believable fight against crisis and speculation,” said the head of the Association of German Public Banks (VÖB), Hans Reckers. According to head of the Federal Association of German Banks, Michael Kemmer, the court made clear that the ESM may not become a money pit.
In an interview with the dapd, Ifo President Sinn praised the banking license that would be given the bailout fund. The Federation of German Taxpayers explained that the verdict’s capping of German liability at 190 billion euros ensures that the ESM will not become an unlimited “bad bank” for European states; the verdict was not a carte blanche to place billions of euros in aid onto taxpayers.
Economics professor Ansgar Belke of the German Institute for Economic Research sees the ESM as the better option for Germany. If the bailout fund were struck down, Germany would have lost influence in emerging from the European debt crisis, he said.
The chief economist at DekaBank, Ulrich Kater, however, does not see a quick recovery for the indebted nations of southern Europe, in spite of the verdict. Commerzbank strategy head Ulrich Leuchtmann said, “the ball is now in politics’ court.”