ECONOMY

EFSF: Rescue program is doomed

Germany?s high court gave on Wednesday the green light to the country?s participation in the emergency mechanism that secured Greece and other eurozone members a bailout from their debt crisis, but the head of Europe?s rescue mechanism warned that the rescue program for Greece is ineffective.

Klaus Regling, the head of the European Financial Stability Facility (EFSF), said Greece?s rescue program was not working, that Athens would not be able to return to the markets as planned and that its citizens may have to accept a decline in living standards.

?The objective [of the European Union and International Monetary Fund aid] is clear, it is to buy time. This is now working in Ireland and Portugal but it is not yet working in Greece,? the European Financial Stability Facility head said.

However, the markets were relieved to hear that Germany?s Federal Constitutional Court ruled that Berlin?s agreement last year to take part in the financial rescue of Greece and to set up a eurozone rescue fund was legal. This was crucial for the eurozone in its battle to exit its debt crisis as Germany is the biggest contributor of loan guarantees to troubled nations such as Greece.

However, the court also said that the German parliament had the right to decide how taxpayer money is spent and that the government could not commit to more emergency expenses without asking the budget committee of the Bundestag first. That means new bailouts could take more time to be agreed and the European Financial Stability Facility could be slower to wield its new powers.

The court did not impose – as some had feared – the harsher requirement that emergency packages be approved by the full parliament.

The court ruling helped European markets breathe a sigh of relief, with the Athens bourse posting big gains after more than a week of losses.

The Athens Exchange general index ended at 929.45 points, soaring by 7.98 percent from Tuesday?s close. The blue chip FTSE/ATHEX 20 index rose 10.04 percent to end at 391.58 points.

Turnover came to 62.6 million euros.