Wednesday

28th Jun 2017

Banking union faces legal challenge in Germany

  • ECB governing council (Photo: European Central Bank)

Germany's constitutional court is once again to be a testing ground for the eurozone's reponse to the financial crisis as a group of academics has filed a case arguing that the banking union is illegal.

The five academics argue that the Banking union - a new supervisory and bank resolution system for eurozone banks - breaches German law as it was not agreed with the right treaty changes, reports Die Welt am Sonntag.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

Markus Kerber, a finance professor at Berlin Technical University (TUB), told the paper that the banking union had "no legal basis in the EU treaties and so represents a breach of constitutional rights."

The supervisory system - under which the European Central Bank will, from November, oversee the financial health of around 120 banks with the power to shut them down - is the "pinnacle of Brussels power-grabbing to date", says Kerber.

The complainants, who filed their papers last week, also find that a conflict of interest has arisen because the ECB council, which also makes interest rate decisions, has a veto right on banking supervision decisions.

The challenge also calls into question the Single Resolution Mechanism, which sets out to deal with failing banks, as well as the €55bn fund meant to cover the costs of the process.

Kerber and his allies say that EU leaders did everything to avoid a treaty change because the ensuing national ratifications would have been too politically risky.

He accused German finance minister Wolfgang Schaeuble of "misleading" the public about the risks of the banking union and said the parliament was "fast asleep".

Germany's constitutional court has been the scene of several challenges concerning further economic and monetary integration in the eurozone. Its rulings normally allow the action to go ahead but with some caveats.

Each challenge, however, represents renewed uncertainty for policy-makers and the markets while the case makes its way through the court.

The banking union is seen by some as the most far-reaching integration step since the introduction of the euro.

The court earlier this year rejected a challenge - in which Kerber was also involved - to the eurozone bailout fund, the European Stability Mechanism.

It found the fund to be legal so long as the Bundestag, the German parliament, exercised enough oversight on it.

But the court also referred a decision on Outright Monetary Transactions (OMT) a never-used 2012-announced plan to buy the government debt of troubled eurozone countries, to the European Court of Justice (ECJ).

The German judges asked several questions about the legality of the scheme - widely credited with easing the eurozone crisis - and outlined how the EU court would have to interpret OMT in order for the German court to find it acceptable.

The ECJ still has to rule on the matter.

ECB overstepped its mandate, German top court says

The German constitutional court has said the ECB overstepped its mandate when promising to buy as many government bonds as necessary to stabilise the euro, but it referred the verdict to the EU's top judges.

Bank rescue fund to rely on big lenders

Europe's biggest banks will foot almost all of the bill for a new EU rescue fund for stricken lenders, according to a plan published on Tuesday.

EU approves rescue of Italian banks

The European Commission gave the green light to a €17-billion plan by the Italian government to save Banca Popolare di Vicenza and Veneto Banca.

Row between EU ministers halts e-book tax rate

A bill to reduce VAT rates on e-books and e-publications has become the latest victim of a row between the Czech Republic and its partners over its own plan to collect VAT.

Focus

EU and China move to fill US void

At a summit in Brussels, EU and Chinese leaders will attempt to deepen ties on trade and climate as US president Trump plans to pull out of the Paris climate deal.

Italy reaches EU deal on failing bank

After months of negotiations, the European Commission and Italy agreed on the terms of rescue for Monte dei Paschi di Siena bank, including job cuts, salary caps and private sector involvement in the bailout.

Stakeholders' Highlights

  1. International Partnership for Human RightsEU-Kyrgyzstan Human Rights Talks Should Insist on Ending Reprisals Against Critical Voices
  2. European Free AllianceEFA Is Looking for a New Intern
  3. Malta EU 2017Conservation of Atlantic Tunas: International Measures Become EU Law
  4. European Healthy Lifestyle AllianceCan Statin Therapy Interfere With a Physically Active Lifestyle?
  5. EPSUOn Public Services Day, Stop Austerity! Workers Need a Pay Rise!
  6. EGBAOnline Gambling: The EU Court Rejects Closed Licensing Regimes In Member States
  7. World VisionFaces of Today, Leaders of Tomorrow: Join the Debate on Violence Against Girls - 29 June
  8. ECR GroupThe EU Must Better Protect Industry from Unfair Competition
  9. Malta EU 2017Better Protection for Workers From Cancer-Causing Substances
  10. EPSUAfter 9 Years of Austerity Europe's Public Sector Workers Deserve a Pay Rise!
  11. Dialogue PlatformGlobalised Religions and the Dialogue Imperative. Join the Debate!
  12. UNICEFEU Trust Fund Contribution to UNICEF's Syria Crisis Response Reaches Nearly €200 Million

Latest News

  1. 'USB condoms' and migration on Estonia's EU agenda
  2. EU parliament should befriend transparency
  3. EU fines Google €2.4 bn over online shopping
  4. EU Commission could get say on Russia gas pipeline
  5. G20 is 'test run' for Trump-era climate governance
  6. Political conditions for EU funds prompt debate
  7. May defends proposal on EU citizens' rights
  8. UK visitors to pay into EU budget after Brexit