EFSF optimistic about German court verdict on ESM

MUMBAI: The European Financial Stability Facility (EFSF) is optimistic about the impending verdict by the German court on a petition challenging the constitutional feasibility of the European Stability Mechanism (ESM).

"The probability (of the court banning ESM) is too small. It is very unlikely to happen," EFSF Chief Executive Officer Klaus Regling said in a lecture arranged by International Institute of Strategic Studies (IISS)-Oberoi here last evening.

He, however, admitted that there is no plan-B in case of a negative verdict by the court, which will give its ruling on September 12.

The ESM is a proposed international organisation which, if ratified by the member states in the Euro Area, will give financial support to nations in the Euro Area during financial difficulty.

As per the provisions, the ESM will replace the existing funding programmes conducted through EFSF and the European Financial Stabilisation Mechanism (EFSM).

The ESM, which has a provision for setting up a 500 billion Euro fund could not be started as it has been challenged in the German court by academics and lawmakers from German Chancellor Angela Merkel's own coalition.

Earlier, German Finance Minister Wolfgang Schaeuble had said that he was optimistic regarding the verdict and the court will recognise that the proposed ESM is compatible with the constitution.

Some of the Eurozone nations are facing a severe sovereign debt crisis with higher debt to GDP ratio, creating a downward spiral in growth, which is currently affecting the global financial system at large.

Many of the financially stable member nations along with International Monetary Fund (IMF) are working to rescue the debt-ridden nations in the Euro area.