President of the group of Eurozone Finance Ministers,
Jean-Claude Juncker, on Wednesday welcomed the German constitutional court ruling approving ratification of the EUR 500 billio($645-billion) European Stability Mechanism (ESM) bailout fund, and said that he planned to hold the first meeting of the board of ESM Governors next month.
"I take note of the decision of the German Federal Constitutional Court concerning the request for a preliminary injunction concerning the ratification by the German government of the treaty establishing the European Stability Mechanism (ESM) and the treaty on Stability, Cooperation and Governance in the Economic and Monetary Union (TSCG)," Juncker said in a statement late on Wednesday.
Juncker said he was now looking forward to the completion of outstanding procedures that would allow the Treaty Establishing the ESM to enter into force. He said the inaugural meeting of the ESM-Board of Governors was now planned to be held in the margins of the Eurogroup meeting of October 8 in Luxembourg.
Regarding the TSCG, Juncker said it would come into force only after 12 of the 17 Eurozone member-states ratified the measure, and added that he expected it to happen "not earlier than January 1, 2013."
"Both treaties represent a major step forward towards closer fiscal and economic integration and stronger governance in the euro area. They are part of our comprehensive strategy to bolster the outlook for fiscal sustainability and growth in the euro area," he added.
Juncker's statement came hours after Germany's top court cleared the way for the ratification of the ESM, rejecting temporary injunctions against the bailout fund and the fiscal compact in its much-anticipated judgment on Wednesday. However, the court imposed certain conditions, including capping Germany's ESM liability.
The court said Germany must cap its bailout fund liability at EUR 190 billion and further expansion of the country's ESM share needs to get Parliament backing. It added that both Houses of the Parliament must be informed of any decisions on the ESM in future.
Wednesday's court ruling allows German President Joachim Gauck to sign the Treaty into law. Incidentally, Germany is Eurozone's largest economy and is required to contribute 27 percent of the single currency group's rescue fund.
In another development, European Commission President Jose Manuel Barroso on Wednesday proposed a single supervisory mechanism, or SSM, for the euro area banks. Under the proposed mechanism, the ultimate supervisory responsibility related to financial stability of all banks in the euro area will be given to the European Central Bank. He called for having the SSM in place by January 1, 2013.
"We want to break the vicious link between sovereigns and their banks. In the future, bankers' losses should no longer become the people's debt, putting into doubt the financial stability of whole countries," Barroso said while presenting the plan.
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