Thursday

20th Jan 2022

Bundestag powers over bailout fund key to German court approval

  • A record of 37,000 plaintiffs have challenged the bailout fund in the German constitutional court (Photo: jgieseking)

Germany's top court on Wednesday (12 September) will rule on whether the upcoming eurozone bailout fund (ESM) and a treaty on fiscal discipline comply with the German constitution.

A No is unlikely, but extra safeguards for the Bundestag are to be expected.

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A record of 37,000 plaintiffs have teamed up against the European Stability Mechanism, a €500-billion-strong fund which had been due to come into force in July but was postponed pending the German Constitutional Court ruling.

The challenges argue the fund - which is seen as an essential tool to stem the lingering euro-crisis - is flouting democratic principles and the EU's own no-bailout clause enshrined in its treaties.

But for the eight judges in Karlsruhe, only one thing matters: is the German Parliament (Bundestag) able to control decisions affecting taxpayers' money or not.

On Monday, they rejected a last-minute challenge asking them to further delay the verdict and force the European Central Bank to reverse its decision to buy bonds in connection with the ESM.

"The Constitutional Court does not have a say over whether the ESM makes sense or not or over whether it observes EU law. Its competence lies only with whether German citizens represented by the Bundestag have an influence on budget-affecting decisions of Germany as part of the EU," Eckart D. Stratenschulte, head of the European Academy in Berlin, a think-tank, told this website.

He agreed with the general expectation the court will not say the ESM is unconstitutional - a ruling which would wreck havoc with all current euro-rescue plans and aggravate the crisis.

"What the court will examine is whether others - such as the board of governors of the ESM - can rule on behalf of the Bundestag and, say, increase contributions," he said.

The German government says that the finance minister is part of that board and has a blocking minority. Also that, since every time the minister votes approval would first have to be sought from the Bundestag, the parliament has the last say.

The judges are likely to reinforce this condition.

Once a court strictly for German audiences, Karlsruhe is now watched by investors all over the world.

Stratenschulte says this is both a reflection of Germany's economic might within the 27 EU states and a result of the current European architecture, where nation states remain strong.

"The EU is not a federal state, it is a federation of sovereign states. In theory, every state has the power to say no to more integration. We've seen it with the European Constitution being vetoed in France and the Netherlands," he said.

"But of course the economy of Germany makes a difference. It is the economic engine of Europe. It matters if Finland says it will not contribute to the ESM, but if Germany says that, the ESM is over. All animals are equal, but some are big and some are small," he added.

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