Germany’s constitutional court ruled that participating in bail-outs for peripheral eurozone states did not violate the German constitution. But the parliament’s budget committee will have to give prior approval before any further financial guarantees are extended to other eurozone countries. Elsewhere, Greece’s government, which has been making scant progress on its deficit-reduction targets, promised to redouble its efforts. Soaring Italian bond yields prompted the government, which had watered down its austerity package, to announce measures to strengthen it.
What the commentators said
The upshot of the ruling is that getting future rescue measures through the German parliament is likely to become even harder. Yet it’s hard enough at present, as Marcus Walker pointed out in The Wall Street Journal. The government is split on whether to vote for beefing up the eurozone bail-out fund later this month.
Delays and complications abound elsewhere too. Slovakia has delayed a vote on the rescue fund until December. There has been a spat over new loans to Greece, with Finland and other states insisting on collateral. Many now wonder whether the second bail-out package for Greece “will ever get off the ground”, said Capital Economics. The backsliding on deficit-reduction targets shows that Greece is still having trouble with the first one.
Meanwhile, Italy’s “last-minute U-turn” to strengthen its austerity package with measures including a wealth tax and a VAT increase has simply “reinforced the image of a government in disarray”, said Guy Dinmore in the FT. Europe’s leaders seem stuck, said Jeremy Warner in The Daily Telegraph. They are “miles away from either of the two remedies likely to resolve the crisis: break-up of the euro or the establishment of political and fiscal union”. In the meantime, the risk of a “disorderly default”, which would trigger another banking crisis, just gets bigger. No wonder “investors are running for the hills”.