MNI BRIEF: Karlsruhe Court Rejects ESM Treaty Challenge

Germany's Constitutional Court has rejected a legal challenge to the EU’s amendment to the ESM Treaty, ruling it inadmissible. The treaty has been ratified by all EU member states, apart from Italy and today’s ruling opens the way for Germany’s President Frank-Walter Steinmeier to sign off on it.

The aim of the Treaty amendment was to bolster the financial stability role of the euro zone bailout fund, in the context of EU efforts to deepen banking its Banking Union, by the creation of a common backstop for the Single Resolution Facility. It also aims to strengthen the ESM’s effectiveness as a provider of prudential financial assistance. Complainants had argued that the treaty changes amounted to a transfer of sovereign power to the EU.

Italian leaders have to date held off on ratifying the ESM Treaty changes, citing the German legal challenge as the reason.