26 September 2012

Federal Government paves the way for permanent European Stability Mechanism (ESM)

With today's Cabinet decision, the Federal Government meets the requirements for the ratification of the ESM Treaty that were stipulated by the Federal Constitutional Court on 12 September 2012. This is a further important step towards the establishment of the ESM.

Before the decision was taken, the Federal Government presented the joint declaration of the ESM signatories to the German Bundestag and the Bundesrat and explained the procedure for the period until the ESM Treaty comes into force. In this way, it ensured the comprehensive involvement of the German legislature, as required by the Federal Constitutional Court.

It is the Federal Government’s firm conviction that the joint declaration meets the conditions set by the Federal Constitutional Court, enabling the ESM Treaty to be put into force as soon as possible.

In detail:

On the sidelines of the informal Eurogroup meeting in Nicosia on 14 September 2012, the European partners established that they shared the same interpretation of the ESM Treaty and agreed to document this by issuing a joint, binding interpretative declaration. In consultation with the responsible Ministries, the conditions set by the Federal Constitutional Court on 12 September 2012 are being implemented by means of this approach as well as the text, which was also agreed with the parties.

The Federal Government had informed the other parties to the ESM Treaty of the requirements/obligations stipulated by the Federal Constitutional Court. The signatory states agreed that there were no objections to the clarifications requested by the Federal Constitutional Court. The clarifications are to be made under international law by means of a joint interpretative declaration issued by all the parties to the ESM Treaty. In this way, the ESM signatories are creating the clarity of interpretation requested by the Court. The declaration does not amend the ESM Treaty or introduce new ratification requirements.

The declaration reads as follows:

The representatives of the parties to the Treaty establishing the European Stability Mechanism (ESM) signed on 2 February 2012, meeting in Brussels on 26 September 2012, agree on the following interpretative declaration:

• "Article 8(5) of the Treaty Establishing the European Stability Mechanism ("the Treaty") limits all payment liabilities of the ESM Members under the Treaty in the sense that no provision of the Treaty may be interpreted as leading to payment obligations higher than the portion of the authorised capital stock corresponding to each ESM Member, as specified in Annex II of the Treaty, without prior agreement of each Member’s representative and due regard to national procedures.
• Article 32(5), Article 34 and Article 35(1) of the Treaty do not prevent providing comprehensive information to the national parliaments, as foreseen by national regulation.
• The above mentioned elements constitute an essential basis for the consent of the contracting States to be bound by the provisions of the Treaty."

The joint declaration of the parties to the ESM Treaty will become binding under international law once it has been signed by the signatory states’ Ambassadors and deposited with the Council Secretariat. Only then will the Federal Republic of Germany complete the ratification process by depositing the instrument of ratification signed by the Federal President with a reference to the joint declaration.

Germany’s financial contribution to the ESM is secure. The Supplementary Budget Act was promulgated in the Federal Law Gazette on 18 September. This means that of Germany’s total contribution of €21.7 billion to the ESM capital, the first two instalments, amounting to about €8.7 billion and to be paid before the end of 2012, are now authorised under budget law. By including a guarantee authorisation in the ESM Financing Act that came into force on 19 September 2012, the Federal Government has also ensured that Germany’s guarantees of approximately €168 billion can be accessed if needed. Germany’s total contribution to the ESM is capped at €190 billion.

The Federal Government is confident that the European Stability Mechanism can now be set up quickly, which would represent an important step towards more stability within the eurozone.

Press release

© Bundesfinanzministerium