26th Oct 2016

Fiscal compact, bailout fund challenged in German court

  • Supporting documents for the complaints lodged on behalf of 12,000 Germans (Photo: Mehr Demokratie)

Six constitutional complaints were lodged in Germany over the weekend against the treaty on fiscal discipline and the establishment of a permanent eurozone bailout fund. The plaintiffs cite a lack of democratic oversight and a denting of budgetary powers.

Barely had the German parliament approved the two pieces of legislation late Friday evening (29 June), when centre-right and leftist lawmakers, as well as a democracy group filed their promised constitutional challenges.

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The group “More Democracy” represented by former justice minister Herta Daubler-Gmelin lodged its complaint with the Karlsruhe-based court on behalf of 12,000 people who signed an online petition. In a video they explain that the permanent bailout fund - the European Stability Mechanism (ESM) - will be a sort of super-bank eluding any democratic or judicial controls. Rules enshrined in the fiscal compact - a Berlin-driven project - will in its turn undermine the sovereignty of the parliament in budgetary matters, they say.

Peter Gauweiler, a lawmaker from the Bavarian Christian Social Union, the sister party of Chancellor Angela Merkel’s Christian Democratic Union, also filed a petition with the court. Gauweiler argues that the ESM breaches the no-bailout clause included in EU's treaties, ruling out any direct aid to struggling states.

But that rule has already been circumvented by the temporary bailout fund, the European Financial Stability Facility. The Karlsruhe-based court has already ruled that bailouts are allowed as long as the German parliament approves each one of them.

A fourth complaint comes from a group formed around law professor Karl Albrecht Schachtschneider, a long-standing euro-critic who also challenged the introduction of the single currency.

Two more complaints come from German citizens whose names are not mentioned, Markische Allgemeine newspaper reports.

The court is expected to rule within a few weeks. German President Joachim Gauck has already indicated he will not sign the two bills into law pending the Karlsruhe verdict.

The ESM was supposed to come into force on 9 July. A meeting of eurozone finance ministers that day is expected to approve a Spanish bailout of up to €100 billion, as well as a full bailout for Cyprus.

Both are likely to be funded out of the EFSF, which has €250 billion left until the ESM comes into being.

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