eurozone crosses hurdle in constitutional showdown
Last Updated : GMT 07:42:27
Arab Today, arab today
Arab Today, arab today

Eurozone crosses hurdle in constitutional showdown

Arab Today, arab today

Arab Today, arab today Eurozone crosses hurdle in constitutional showdown

Frankfurt - AFP

The eurozone crossed a vital hurdle on Tuesday in its drive to adopt crisis tools, helped by a preliminary German court ruling, but anger over austerity hit the streets in Spain. The German Constitutional Court rejected a last-minute legal challenge by a eurosceptic politician and said it will issue on Wednesday its main decision on whether German President Joachim Gauck can sign into law the European Stability Mechanism (ESM) and the European fiscal pact. The main decision on Wednesday is seen in the European Union and on global markets as a crucial moment for the eurozone. In addition to that ruling, the Dutch go to the polls with an anti-austerity party set to score big gains and EU leaders are to unveil plans for the first step in creating a eurozone banking union. A decision on Wednesday to hold up Germany\'s participation in the 500-billion-euro ($640 billion) ESM bailout fund and the pact obliging countries to cut their deficits would negate the strategy elaborated by European leaders to overcome the debt crisis. It could lead to a new spike in market tensions after a calm restored by the European Central Bank\'s decision last week to launch a new bond-buying programme. The last-minute complaint to Germany\'s Constitutional Court had argued that the ECB\'s new bond-buying programme was an illegal monetarisation of debts. It had sought a ruling on that issue before a decision whether the ESM and fiscal pact are an illegal transfer of budgetary sovereignty under Germany\'s Basic Law. While the thought exposing Germany\'s public finances to unlimited risks should one eurozone country after another topple under the debt crisis has inflamed German concerns, having to make repeated cutbacks may be inflaming separatism A thousand buses from across the northeastern Spanish region of Catalonia carried supporters to Barcelona for the region\'s national day, or Diada, with a slogan: \"Catalonia, a new European state.\" Fiercely proud of their distinct language and culture, Catalans increasingly feel they are getting a raw deal from Madrid. Last month, the region reached out for a 5.0-billion-euro central government rescue so as to make repayments on its 40-billion-euro debt, equal to a fifth of its total output. The central government in Madrid, which is trying to squeeze the country\'s overall deficit back into EU limits, has demanded regions make huge cuts to public services. Catalonia, which accounts for one-fifth of the Spanish economy, says it pays the central government far more in taxes than it receives in return -- some seven to eight billion euros a year -- and wants the power to raise and spend its own taxes like the neighbouring Basque Country. Meanwhile Finnish Prime Minister Jyrki Katainen backed Spain in its \"unfair\" financial crisis and said he would not pressure it to seek a full sovereign bailout. With expectations high that Spain will seek a full-blown bailout from Europe, Spanish Prime Minister Rajoy said on Monday that he would not accept any economic bailout that dictates spending cuts or touches old-age pensions. Katainen, a strict defender of fiscal discipline who was a tough player in July negotiations for a eurozone rescue loan to Spain\'s banking sector, said he would not dictate to Rajoy what areas to make cuts in. The ECB said last week it could make massive bond purchase for countries under so-called precautionary rescue programmes, which would have less intrusive surveillance than a full bailout, but the mechanism is so far untested. Meanwhile Greece struggled to find 11.5 billion euros in spending cuts over the next two years in order to unlock 31.5 billion euros of bailout loans it needs to stay afloat. German Finance Minister Wolfgang Schaeuble s hailed \"substantial progress\" made by Greece in cutting its debt mountain but urged Athens to stick to its promises if it wanted to receive much-needed fresh aid, in a speech to German lawmakers. Investors sought to reduce their risk on the eve of such an eventful day, pushing European equities down in midday trading on Tuesday. London stocks were down 0.45 percent, Paris 0.52 percent, Frankfurt 0.15 percent, and both Madrid and Milan by 1.07 percent. The prospect of US monetary easing helped the euro make gains against the dollar, rising to $1.2793 from $1.2758 late on Monday.

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