Posted on September 14, 2012
By Dietmar Hipp in Karlsruhe, Germany
Source: Spiegel Online
Thanks to A.
on Wednesday: The court will next consider the ECB’s bond-buying
The winners and losers in Wednesday’s
ruling on the permanent euro bailout fund by Germany’s highest court may
appear clear cut, but the decision is more complicated than it seems.
Before the European Stability Mechanism can be ratified, the German
government must answer complicated legal questions.
In its press release on Wednesday, Germany’s Federal Constitutional
Court said that the petitions for the issue of temporary injunctions
that would block the ratification of the European Stability Mechanism
(ESM) had been “unsuccessful for the most part.” But “for the most part”
does not mean “entirely”. Indeed, in the aftermath of the ruling, the roles of winners and losers are not as clear as they may have seemed at first glance.
It would, of course, be going too far to say that the verbal lapse of
court President Andreas Vosskuhle was a Freudian slip. Right in the
first sentence of the text of the ruling, Vosskuhle involuntarily caused
a wave of laughter when he said that the petitions were “for the most
part well-founded” — which would have meant that the plaintiffs had won.
Vosskuhle corrected himself with a laugh, saying that the petitions
were actually “unfounded.”
But the slip of the tongue reflects a deeper truth. Nobody seriously
believed that the plaintiffs, led by the stubborn conservative Bavarian
politician Peter Gauweiler, would win an outright victory. But the
court’s ruling contains a number of details that could cast a shadow
over the winning side’s victory, and possibly grant a not insignificant
triumph to the other side — which is why Gauweiler himself spoke of a
That applies to the reservations that the Karlsruhe-based court has
now set as conditions for the ratification of the ESM by Germany.
- The court ruled that the €190 billion ($245 billion) limit on
Germany’s liability must continue to apply, even if the treaty allows
for a different interpretation — unless it involves an increase in the
capital stock with the express consent of the German respresentative on
the ESM board (and with a prior decision by the Bundestag, Germany’s
- Another reservation involves the rights of parliament. The court
ruled that the ESM’s confidentiality requirements cannot be permitted to
preclude the Bundestag from receiving “comprehensive information” about
the fund’s operations.
The question of how exactly these legal declarations are supposed to
be implemented is likely to cause headaches among legal experts in the
German government and the president’s office. Berlin-based lawyer Ulrich
Karpenstein, one of the experts involved in the background in the legal
proceedings, says that a unilateral interpretative declaration on these
points which “authorizes a withdrawal from the ESM treaty only in the
event of a serious violation” would be enough.
But it is doubtful whether this right to withdraw from the treaty,
which would apply exclusively in the event of a serious violation, is
really enough to satisfy the provisions that the Constitutional Court has
laid down. In the ruling, the court says that Germany “must express
clearly that it does not wish to be bound by the ESM Treaty in its
entirety if the reservations made by it should prove to be ineffective.”
According to the German parliament’s attorney of record, Martin
Nettesheim, this means that the German government must affix a formal
reservation under international law and, at the very minimum, must
inform and solicit a response from the other euro-zone member states and
provide them with a reasonable deadline within which to enter any
It’s possible that, and this is one of the delicate issues, given the
character of the ESM, the silence of the other member states would not
be sufficient. They might have to officially accept these reservations.
That would mean that the treaty would only be ratified in Germany once
all had agreed — or if it hadn’t heard from the other states within a
12-month period. Nettesheim said he didn’t believe the other countries
would “take a stand against these points.” If they did, though, “we
would have a major problem.” In any case, one thing is certain: It won’t
happen slapdash, either, because the other member states have to be
given sufficient time to consider Germany’s reservations.
‘ESM Will Be Sufficient for Ireland and Cyprus, But Not Spain Or Italy’
Meanwhile, the statements made by the Constitutional Court about the
European Central Bank (ECB) are already making supporters of a permanent
bailout fund with sharper teeth nervous. Volker Beck, a legal affairs
expert with the Green Party in parliament, said he found “irritating”
what the court had said about the relationship between the ECB and the
The Karlsruhe ruling explicitly states that the ESM cannot “become a
vehicle of unconstitutional state financing by the European Central
Bank.” The Constitutional Court’s interpretation of the ESM treaty
itself is that it stipulates that the permanent euro bailout fund can
only borrow money on capital markets and not from the ECB. Under the
clear guidelines provided by EU law, the justices said the ESM treaty
could only be interpreted to mean that “borrowing operations” with the
ECB are “not permitted.”
That’s why Beck fears that the ESM will be robbed of “part of its
possibilities for taking action,” because it would not have the ability
to “increase its firepower” through borrowing from the ECB.
But it is precisely this limitation that has attracted praise from
the petitioners in the case. Christoph Degenhart, a Leipzig-based
constitutional law professor who represented the more than 37,000 people
who had joined together under the group Mehr Demokratie, or “More
Democracy,” to file the constitutional complaint, said he “wasn’t
entirely unsatisfied” with the ruling. “The main goals have been
The attorney said the Constitutional Court had demanded the necessary
reservations. Additionally, it had interpreted the treaty in so-called
conformity with the constitution and thus rendered the ESM “hardly
manageable any more,” particularly in relation to the ECB. “The ESM will
still be sufficient for Ireland or Cyprus, but no longer for Spain or
Italy,” he said.
Besides, the current ruling is just a preliminary one. The justices
have limited their detailed remarks to the points raised through the
ratification of the ESM and the fiscal pact that accompanies it. The
justices have also noted explicitly that they will also review the role
of the ECB more precisely during the main proceedings about the issue
still to come, which necessarily will follow, and that this will include
closer scrutiny of the question of whether the ECB’s bond purchases go
beyond what is currently permitted under the EU treaties.
For his part, Degenhart feels certain that “further limitations will
be imposed.” The fact that the Constitutional Court justices have a need
for clarification on several issues and that they consider those issues
to be urgent, suggests this will actually happen: The court has said
that it already plans to hear further oral arguments this fall.
Thanks to: http://jhaines6.wordpress.com