If you ask Wolfgang Schäuble these days about his state of mind in the run-up to the Federal Constitutional Court's planned ruling on the permanent euro bailout fund this Wednesday, the German finance minister brushes it aside. Worries? Why should he have any?
In an interview with the Bild am Sonntag newspaper, he explained that people have taken great care to ensure that the euro bailout fund is constructed in a way that it does not violate the German constitution. "So far, the Constitutional Court has never ruled that the course of European integration is directed against the constitution," he told the paper.
Schäuble isn't alone in his demonstrative casualness. In the government coalition, comprised of the conservative Christian Democratic Union (CDU), its Bavarian sister party the Christian Social Union (CSU) and the business-friendly Free Democratic Party (FDP), there is a broad assumption that the justices in Karlsruhe will rule on Wednesday that the European Stability Mechanism (ESM), the permanent euro bailout program, as well as the fiscal pact, can go into effect. With the exception of the Left Party, most people in Berlin's political circles hold the same view. Most Berlin politicians -- but not all.
At least one prominent politician is still trying to derail the ESM: Thanks to his persistent opposition to the euro rescue policies of Chancellor Angela Merkel's government, Peter Gauweiler has earned his reputation as a euro rebel. He has alsochallenged Germany's bailout policies at the Constitutional Court before. Gauweiler, who is with Bavaria's CSU, is trying to prevent the court from issuing another of its "yes, but" rulings in which the court imposes additional conditions on the government but basically allows it to continue funding the euro bailout as it has in the past. This weekend, Gauweiler attempted to torpedo the decision at the last minute, creating uncertainty in Berlin and Brussels.
The CSU politician submitted a new petition over the weekend to the Karlsruhe court to delay its ruling on the ESM. Gauweiler has based the petition on the decision announced on Thursday by the European Central Bank (ECB) that it would purchase unlimited quantities of sovereign bonds from crisis-plagued euro-zone member states. Gauweiler argues in his petition that the ECB's step has "created an entirely new situation" and that "almost all of the discussion that has taken place so far is now invalid". Through the bond-buying program, he argues, the ECB itself will become an "unlimited ultra- and hyper- bailout fund" -- one that national parliaments will have no control over.
Now Gauweiler is demanding that the court reject the ratification of the ESM treaty until the ECB revises its decision. He is arguing that if the court is not able to decide on the emergency petition that it should delay the ruling on the ESM that has been scheduled for Wednesday.
On Monday, a court spokesperson said the judges would convene later in the day to consider Gauweiler's petition and that a decision would likely be made by Tuesday morning on how the court would proceed.
Delay in Decision Would Be 'Highly Problematic'
The fact of the matter is that the Constitutional Court is taking the current pending complaints about the euro bailout very seriously. The main case being heard is backed by 37,000 German people, making it the biggest constitutional complaint in German history. Even though the current decision is being conducted in expedited proceedings, the court's justices have still allowed themselves more time than they normally would. They also took other unusual steps for expedited proceedings, including hearing oral arguments.
The question for the court now is this: If it wants to stick to the position it has held until now, will the court not also have to take the appropriate amount of time to consider Gauweiler's complaint? Does it not need a few more days or weeks? Or has the court already taken into account in its ruling that the ECB might move ahead with a bond-buying program that would include a role for the ESM?
ECB President Mario Draghi said last week the ECB will link its market interventions to the ESM, which would apply strict austerity criteria to countries that sought aid.
The backers of the main complaint against the ESM have also offered support for Gauweiler's petition. "The current developments at the ECB confirm our worst fears," said Christoph Degenhart, a professor of law at the University of Leipzig who is representing the organization Mehr Demokratie ("More Democracy), which is a plaintiff in the main case being heard at the Constitutional Court. "Because it can print unlimited amounts of new money, the European Central Bank has the ability to thwart any ruling that the Constitutional Court makes," he said.
Alexander Dobrindt, the secretary general of Gauweiler's CSU, who has likewise been critical of euro rescue policies, said he had "major sympathy" for his colleague's move.
Meanwhile, the Research and Legislative Reference Services of the German Bundestag, the German counterpart to the Congressional Research Office that advises the federal parliament, warned in a report on Sept. 5 that the permanent euro rescue fund could impede on the role of Germany's parliament in budgetary decision-making. In the paper, obtained by the Neue Osnabrücker Zeitung newspaper, the research staff warned that the "possible direct and possibly unlimited liability" for the debts of other countries would violate the German parliament's right to determine the national budget. The advisory opinion, which had been solicited by the Left Party, also stated that it was unjustifiable that the "authority of the state and its ability to exercise it could be limited by tying the hands of the budget legislature as a result of liabilities through international agreements." It added that if one ESM member could no longer contribute to the bailout fund, "there would be higher payment obligations for other ESM members."
Still, Michael Stübgen, the CDU's point man in parliament on European policy issues, said he does not see a connection between possible ECB bond buys and the ESM. "I'm unconvinced by the emergency petition," he said. He also warned against a delay in the ruling on the main case. "This would be highly problematic," he added. Indeed, a further delay would threaten to cause new uncertainty and turbulence on the markets.
Concerns about ECB's Independence
Germany is the last country to ratify the €500 billion ($639 billion) bailout fund, and other Europeans are waiting with suspense for German approval so that the ESM can finally begin operations in October. Sources in Berlin and Brussels have all said there is no "Plan B" if the court rejects ESM ratification.
Even though most in Merkel's cabinet believe the court will approve the ESM, there are still widespread concerns even within the chancellor's coalition government about the ECB's possible bond-buying program. SPIEGEL reported in its latest issue that, in a scenario that has been circulated internally at the central bank, ECB officials have calculated that bond-buying costs for the rest of this year could run as high as €70 billion to €100 billion if interest rates for Spanish and Italian bonds begin to shoot up again as they did in recent months.
Within Merkel's CDU and her junior coalition partner, the FDP, many politicians believe the central bank has fundamentally exceeded its mandate and that the ECB's role is being abused in order to finance states. ECB chief Draghi has sought to counter such concerns, noting last week that the central bank would only purchase bonds on the secondary markets from crisis-hit countries if they applied for aid through the ESM and agreed to the reform conditions applied by the euro rescue fund. Spain is considered to be the first country that is likely to apply.
The link between bond-buying and the ESM would actually provide Germany's federal parliament, the Bundestag, with an indirect veto right because it already has the right to vote on whether a country should receive ESM aid. The German government has repeatedly stated that the ECB retains its full independence, but that's not entirely true if it is politicians who will determine whether the central bank can buy a country's bonds or not. "Given that the ECB action is contingent on programs that are decided politically, it does raise some questions about its independence," Volker Kauder, the CDU's floor leader, told the mass-circulation Bild newspaper. The ECB's official mandate is to ensure price stability, and it is prohibited from directly financing states. But it also has a mandate to remain independent of governments in its decision-making.
Indeed, the situation has become highly complex, and there will be no lack of issues to debate in the run-up to Wednesday's ruling -- if it still happens. The same day, the European Commission is slated to unveil its plans for a European banking authority. And in the neighboring Netherlands, an important ally of Germany in efforts to save the euro, a new government is to be elected. Yet again, these are proving to be decisive days for the future of Europe's common currency.
Spiegel Online
No comments:
Post a Comment