The euro area’s 500 billion-euro ($648.7 billion) firewall won approval from the European Union’s highest court, which swept away a challenge that threatened to derail efforts to keep the currency bloc intact.
Examination of a treaty change in 2011 to allow for the creation of the European Stability Mechanism, or ESM, “disclosed nothing capable of affecting the validity” of the mechanism, the EU Court of Justice in Luxembourg ruled today. The euro area’s 17 members acted in line with EU rules by ratifying the ESM treaty, the court ruled.
Today’s ruling lifted a potential shadow hanging over attempts to save the euro, just hours after ministers struck a deal to ease the terms on emergency aid for Greece.
The EU’s top court worked on the case under a fast-track procedure for almost 4 months, using for the first time in such a case its full force of 27 judges to consider the challenge.
Irish politician Thomas Pringle had argued that the ESM, which was declared operational on Oct. 8, violates the no- bailout provision under EU law and encroaches on the bloc’s role in economic and monetary policy. He challenged a March 2011 decision by EU governments to change a legal provision in a treaty to allow for the ESM’s creation, saying this was done incorrectly.
The ESM replaces the 440 billion-euro European Financial Stability Facility. The two funds will run in parallel until the EFSF is phased out in mid-2013. The ESM in September survived a legal challenge in Germany, handing a victory to Chancellor Angela Merkel, who championed the facility as vital to save the euro area from a fiscal meltdown.
“The volume of money it is to gather from the public in euro-zone countries is enormous,” Pringle’s lawyer Joe Noonan said in an e-mailed statement. The ESM was set up in the “absence of accountability and of proper democratic control.”
With rulings often taking between one to two years, the EU court decided on Oct. 4 to treat Pringle’s case under the accelerated procedure due to the “uncertainty as to the validity of that treaty” and “to remove as soon as possible that uncertainty, which adversely affects the objective of the ESM treaty, namely to maintain the financial stability of the euro area.”
The court’s ruling can’t be appealed. Ireland’s Supreme Court, which sought the EU court’s guidance in July, will have to give a final decision on Pringle’s challenge in line with today’s ruling.
The case is: C-370/12, Thomas Pringle v. Government of Ireland, Ireland and the Attorney General.
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