EU's top court rules ESM fund compatible with EU law

LUXEMBOURG Tue Nov 27, 2012 8:47am GMT

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LUXEMBOURG (Reuters) - The European Union's highest court ruled on Tuesday that the euro zone's permanent bailout fund, the European Stability Mechanism (ESM), was in line with European law, despite a challenge by an Irish lawmaker.

The court was ruling on a question referred to it by the Irish High Court on the compatibility of the ESM with EU law.

The Irish court asked the European Court of Justice (ECJ) for clarity on the matter when it rejected an attempt earlier this year to force a referendum on Ireland's ratification of the bailout fund.

Ireland does not have a veto over the ESM treaty, which took effect in October after approval by 90 percent of the euro zone capital base, giving the fund a lending capacity that will total 500 billion euros ($648.3 billion).

The rescue mechanism for the 17 euro zone countries is to be used to lend to distressed sovereigns in return for strict fiscal and structural reforms.

Irish member of parliament Thomas Pringle launched the case to try to force a referendum on the bailout fund, citing a requirement for any change in Irish law that transfers significant powers to the European Union.

(Reporting by Michele Sinner. Editing by Sebastian Moffett, Philip Blenkinsop)

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