Blog post

ESM? Ja, aber...

Publishing date
12 September 2012

The German constitutional court has, as was widely expected, given a "yes-but" answer to the ESM treaty. The "but" refers to Article 8(5), sentence 1 "The liability of each ESM Member shall be limited, in all circumstances, to its portion of the authorised capital stock at its issue price." The crucial point here is the reference to the "issue price". A number of German critics previously argued that the German liability was not limited to €190 billion as explicitly stated in Article 8(1), but could be higher if the issue price of the authorised capital stock is increased.

A second "but" refers to Articles 32 (5), 34 and 35 (1). Here, the court demands that the two chambers of the German parliament (Bundestag und Bundesrat) need to be fully informed. According to the reading of the court, the three articles could be read in a way that requirement to fully inform the parliament is restricted. And indeed, Article 34 grants professional secrecy to the ESM governors, i.e. the ministers, and directors. This would essentially remove their obligation to fully inform their national parliaments, and in some circumstances might even limit their scope to inform parliament.

The Karlsruhe judges say that these two objections must be removed in a "völkerrechtlich bindend" way, meaning in a way that is binding in international law. My first reaction would be that this probably cannot be done by just agreeing in the German implementing law that the conditions are met. It may require changes to the ESM treaty, or a new treaty alongside the ESM. I suspect that this will significantly delay the implementation of the ESM.

About the authors

  • Guntram B. Wolff

    Guntram Wolff is a Senior fellow at Bruegel. He is also a Professor of Public Policy and Economics at the Willy Brandt School of Public Policy. From 2022-2024, he was the Director and CEO of the German Council on Foreign Relations (DGAP) and from 2013-22 the director of Bruegel. Over his career, he has contributed to research on European political economy, climate policy, geoeconomics, macroeconomics and foreign affairs. His work was published in academic journals such as Nature, Science, Research Policy, Energy Policy, Climate Policy, Journal of European Public Policy, Journal of Banking and Finance. His co-authored book “The macroeconomics of decarbonization” is published in Cambridge University Press.

    An experienced public adviser, he has been testifying twice a year since 2013 to the informal European finance ministers’ and central bank governors’ ECOFIN Council meeting on a large variety of topics. He also regularly testifies to the European Parliament, the Bundestag and speaks to corporate boards. In 2020, Business Insider ranked him one of the 28 most influential “power players” in Europe. From 2012-16, he was a member of the French prime minister’s Conseil d’Analyse Economique. In 2018, then IMF managing director Christine Lagarde appointed him to the external advisory group on surveillance to review the Fund’s priorities. In 2021, he was appointed member and co-director to the G20 High level independent panel on pandemic prevention, preparedness and response under the co-chairs Tharman Shanmugaratnam, Lawrence H. Summers and Ngozi Okonjo-Iweala. From 2013-22, he was an advisor to the Mastercard Centre for Inclusive Growth. He is a member of the Bulgarian Council of Economic Analysis, the European Council on Foreign Affairs and  advisory board of Elcano.

    Guntram joined Bruegel from the European Commission, where he worked on the macroeconomics of the euro area and the reform of euro area governance. Prior to joining the Commission, he worked in the research department at the Bundesbank, which he joined after completing his PhD in economics at the University of Bonn. He also worked as an external adviser to the International Monetary Fund. He is fluent in German, English, and French. His work is regularly published and cited in leading media. 

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