The €500 billion bailout fund, the European Stability Mechanism is facing another challenge to its legality, this time through the European Courts of Justice which has the power to topple the scheme and ban it in its current form.
The latest challenge comes after independent Irish Mp Thomas Pringle made a complaint to the Luxembourg-based EU Court of Justice. Pringle had challenged the legality of the mechanism before in July but lost his bid to stop the Irish government from ratifying the treaty.
The Irish Supreme Court ruled that the ESM does not involve a transfer of sovereignty which would require a referendum to ratify it. Instead, the Court ruled that the Treaty was an agreement to pursue an already-defined policy of the Government. Pringle had argued that the ESM agreed in Brussels at the start of February would involve Ireland losing control of its financial affairs and made the treaty incompatible with the nation’s constitution.
Following on from the Irish challenge this is the third time the treaty has come under legal pressure. In September the German Federal Constitutional Court also ruled to not block the ESM which handed a victory to Chancellor Angela Merkel who had championed the need for the treaty.
Pringles complaint is not expected to be upheld by the court making some think that the decision to take the case to Europe’s most senior court is a waste of time and money or the more cynical amongst us could see the move as a way for the European Union to validate the treaty at the highest court in Europe and silence its critics once and for all. Ina show of force the court has engaged its full complement of 27 judges to consider the challenge.
On October 4th the EU court decided to put the case through under an accelerated programme in order to remove the uncertainty over the treaty as soon as possible. A decision is due for the end of this year.
The ECJ is likely to see the ESM for what it is: a necessary complement to the existing European monetary union structures, plugging a hole in the existing treaties,” said Marco Incerti, an analyst at the Centre for European Policy Studies in Brussels. “Why would they consider it unlawful?”
As a result of the legal action the Euro has weakened against the majority of its peers as investors look to safe-haven currencies such as the US Dollar and to a lesser extent the British Pound.
As of 10:30am
The Pound to Euro exchange rate is currently trading at 1.2285
The Pound to US Dollar exchange rate is currently trading at 1.6017
The Pound to Australian Dollar exchange rate is currently trading at 1.5544
The Euro to US Dollar exchange rate is currently trading at 1.3039
The Euro to Pound exchange rate is currently trading at 0.8140
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