Blog Post

The countdown for the ESM: press views on Karlsruhe

On Wednesday 12 September, Germany’s Federal Constitutional Court (FCC) will announce its decision on the European Stability Mechanism (ESM) as well as on the Fiscal Pact. Immediately after the decision Chancellor Angela Merkel will react in the German Bundestag with a government declaration to the FCC’s decision. The decision is eagerly anticipated by German and EU politicians as well as of both German and international press and we review the German press here.

By: Date: September 11, 2012 Topic: European Macroeconomics & Governance

On 12 September, Germany’s Federal Constitutional Court (FCC) will announce its decision on the European Stability Mechanism (ESM) and the Fiscal Compact. Chancellor Angela Merkel will respond in the German Bundestag, with a government declaration on the FCC’s decision. The decision is eagerly anticipated by German and EU politicians, and by the German and international press. We review the German media build-up to the decision below.

According to the Spiegel, the German government is convinced that the FCC will clear the way for the ESM.  However, a recent publication by Bundestag legal experts (on the behalf of left-wing party Die Linke) warns that the ESM might intervene in the Bundestag’s sovereign rights. The publication on 5 September argues that “a possibly direct and potentially unlimited liability” for the debt of other euro-area countries may compromise the budgetary powers of the Bundestag.

More recently, two days ahead of the decision, CSU deputy Peter Gauweiler argued that the purchase by the European Central Bank of sovereign debt in unlimited volumes on the secondary market bypasses the ESM rules even before its ratification. The ECB should thus withdraw its decision. Furthermore, Gauweiler urged the FCC to postpone its ruling if it is not able to decide on his urgent motion (Spiegel Online). The Spiegel writes writes that CSU Secretary General Alexander Dobrindt also criticised the ECB’s decision to purchase euro-area government bonds, expressesing his “great sympathy” for Gauweiler.

Bond purchases by the ECB would overlap with the ESM, which also has the buying of bonds as part of its toolbox. However, the German law accompanying the ESM treaty clearly stipulates that this action necessitates the approval of the Bundestag. Heribert Prantl in the Süddeutsche Zeitung says that ECB president Draghi’s decision on the bond-buying programme before the FCC’s ruling pleases many economists, but worries jurists as the “end does not justify the means”. It would be good if the European Parliament could act on the issue, but since the FCC decision in 2009 declared it to be a “Minder-Parlament” (less important Parliament), its capabilities are limited. According to Prantl, Europe does not merely need the euro, but also more democracy.

Börse Online writes that the FCC might pronounce positively on the ESM, but the reaction of the financial markets will depend on the stringency of the conditions accompanying the ESM, which are expected to be set out by the FCC.

According to the Manager Magazin the so-called “Draghi effect” last week, namely the decision to buy the sovereign debt of euro-area countries, could quickly vanish in the case of a negative FCC decision, which would be a “party killer” after the euphoria following Draghi’s announcement.

Law Professor Christoph Degenhart writes in Wirtschaftswoche that he is skeptical about the ruling because “the ECB could always foil the FCC’s decision by printing money in unlimited volumes”.

What decision of the FCC is expected by German Constitutional Law experts?

The FAZ writes that most of Germany’s leading Constitutional Law judges expects the approval of the FCC for ratification of the ESM treaty and the Fiscal Compact (based on a Reuters survey). All 20 judges are convinced that the FCC will reject the urgent motions against the two treaties, even if they do not all agree with a possible positive decision. However, 60 percent of the judges also expect the FCC judges to impose harsh conditions on the German government. These could go from greater involvement of the Bundestag or Bundesrat, to a declaration under international law that Germany’s capped liability within the ESM credits cannot be exceeded. To date, the FCC has never blocked any EU measure according to Helmut Siekmann, University of Frankfurt.

Furthermore, a quarter of the judges expect that the FCC ruling will signal that the time has come for a referendum about a new Constitution (the German Basic Law) including the ESM and the Fiscal Compact. The remaining three-quarters, however, argue that this is not plausible as the “FCC won’t force the replacement of the Basic Law, through which it itself is constituted”.

The Spiegel writes  that, given that the FCC previously declared the euro rescue to be legitimate, it will call for amendments to the ESM rather than demand a comprehensive constitutional change. According to Der Spiegel there are two possible points on which the judges could call for amendments. First, they may strengthen the rights of the Bundestag (eg the plaintiffs demand to the inclusion of a cancellation clause in the ESM treaty in order to retain control over state finances). Second, they may demand a definition of the German liability cap within the ESM treaty.

Günther Jauch, German television host, organised a discussion on whether the rescue of the euro had to stop for reasons of democracy. Speakers were Bavarian Finance Minister Markus Söder, former chief economist of the ECB Otmar Issing, and former FCC vice president Winfried Hassemer. Hassemer was invited in order to give some insights into the working methods of the FCC. According to the Welt, although the 37,000 plaintiffs are still waiting and hoping, the decision of the FCC has probably already been taken. Hassemer reckons that the text already exists. Moreover, he assumes the existence of economic expertise on the consequences of a failure of the ESM and Fiscal Compact, which is essential for the judges to take a decision. However, he did declined to prejudge the decision.


Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint. Anyone is free to republish and/or quote this post without prior consent. Please provide a full reference, clearly stating Bruegel and the relevant author as the source, and include a prominent hyperlink to the original post.


Warning: Invalid argument supplied for foreach() in /home/bruegelo/public_html/wp-content/themes/bruegel/content.php on line 449
View comments
Read about event More on this topic

Upcoming Event

Feb
27
12:30

Bruegel - Financial Times Forum: The future of euro-area governance

The third event in the Bruegel - Financial Times Forum series will look into the future of euro-area governance.

Speakers: Maria Demertzis, Gideon Rachman, Manfred Weber and Guntram B. Wolff Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read about event

Upcoming Event

Mar
1
12:30

(How) could European safe assets be constructed?

At this event, we are pleased to host Philip Lane, the Governor of the Central Bank of Ireland, who will present the outcome of the ESRB task force’s investigation on safe assets that he chaired.

Speakers: Levin Holle, Philip Lane, Anne A. Leclercq and Guntram B. Wolff Topic: European Macroeconomics & Governance, Finance & Financial Regulation Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read article More on this topic More by this author

Blog Post

The exchange rate and inflation in the euro-area: words following facts

The reduced references in the speeches of the President and Vice-president of the ECB to exchange rate changes in assessing inflation developments correspond to a decreased pass-through from the exchange rate to inflation. So, as it should be, words have followed facts

By: Francesco Papadia Topic: European Macroeconomics & Governance Date: February 16, 2018
Read article Download PDF More on this topic

Policy Contribution

Tales from a crisis: diverging narratives of the euro area

Who gets the blame for the crisis? How did narratives of the crisis develop since 2007? The authors of this paper tried to identify the key crisis-related topics in articles from four opinion-forming newspapers in the largest euro-area countries.

By: Henrik Müller, Giuseppe Porcaro and Gerret von Nordheim Topic: European Macroeconomics & Governance Date: February 15, 2018
Read article More on this topic More by this author

Blog Post

Trust in the EU? The key obstacle to reform

The challenges that Europe faces both from within and from outside require immediate, concerted counter-efforts. While efforts to advance the European economic architecture are desirable and useful, can Europe realistically attempt to integrate further on the basis of such little trust?

By: Maria Demertzis Topic: European Macroeconomics & Governance Date: February 9, 2018
Read article More on this topic More by this author

Podcast

Podcast

What the German coalition agreement means for Europe

The final document on the German coalition agreement will have significant consequences for the European Union and the Eurozone. Bruegel director Guntram Wolff gives his assessment of the agreement's key features in this episode of 'The Sound of Economics'

By: The Sound of Economics Topic: European Macroeconomics & Governance Date: February 7, 2018
Read article More on this topic More by this author

Blog Post

What is the financial balance of EU membership for central Europe?

EU membership led to major financial and economic advantages to central European Member States, partly by encouraging foreign investment. Widespread foreign ownership of capital brought many benefits but also resulted in large profits. Since central European governments are doing their utmost to attract even more foreign capital, foreign profit is set to increase further.

By: Zsolt Darvas Topic: European Macroeconomics & Governance Date: February 6, 2018
Read article More on this topic More by this author

Podcast

Podcast

European Parliament: More representative post-Brexit?

Bruegel director Guntram Wolff features in this episode of 'The Sound of Economics', highlighting how a reallocation of seats in the European Parliament following Brexit provides the opportunity to make the institution more representative of EU citizens.

By: The Sound of Economics Topic: European Macroeconomics & Governance Date: February 5, 2018
Read article More on this topic More by this author

Blog Post

Difficulties and opportunities in reallocating European Parliament seats after Brexit

The European Parliament must carefully consider the reallocation of seats after Brexit, allowing for a potential shift in political alignment and working within parameters already agreed with Member States.

By: Guntram B. Wolff Topic: European Macroeconomics & Governance Date: February 5, 2018
Read about event More on this topic

Past Event

Past Event

Europe’s immigration and integration challenges: Financial and labour market dimensions

The event, organised by Bruegel in cooperation with the Institute for International Affairs will discuss these and related questions and will also feature the launch in Rome of the study authored by Zsolt Darvas on the impact and integration of migrants in the European Union.

Speakers: Roberto Ciciani, Zsolt Darvas, Marcela Escobari, Tatiana Esposito, Manjula M. Luthria, Carlo Monticelli, James Politi and Nathalie Tocci Topic: European Macroeconomics & Governance Location: Banca Monte dei Paschi di Siena, Via Mighetti 30/A, Rome, Italy Date: February 2, 2018
Read article More on this topic More by this author

Opinion

Your job description, Mr. Centeno

Here’s how you run the Eurogroup.

By: Guntram B. Wolff Topic: European Macroeconomics & Governance Date: January 30, 2018
Read about event More on this topic

Past Event

Past Event

Why think tanks matter in the era of digital and political disruptions

Bruegel is pleased to host this panel discussion as part of the global launch of the 2018 Global Go To Think Tank Index, published by the University of Pennsylvania’s Think Tanks and Civil Societies Program.

Speakers: Matt Dann, Shada Islam and Hlib Vyshlinsky Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: January 30, 2018
Load more posts