Verdicts from Karlsruhe usually serve as pacifiers for the German public and, more recently, for the eurozone as a whole. Remember the ruling on the ESM and the Fiscal Compact, which the German Federal Constitutional Court concluded was reconcilable with the country’s basic law, or Grundgesetz, in September 2012. What a relief this announcement was for the eurozone’s capitals in their step-by-step struggle for the rescue of the common currency. Germans tend to have a great deal of respect for their constitutional court, and fellow Europeans over the past years learned that every year or so they would have to set eyes onto this city in the southwest of Germany: What does Karlsruhe say?
However, on the euro, things remain far from being put to rest. The overall question that continues to loom is to what extend the more recent rescue measures are covered under the Grundgesetz, or whether they lead to a further Europeanization that the German constitution does not allow for in its current shape. The eurozone continues to be a moving target and at the time of the ESM verdict in the fall of 2012 the judges already knew they would have to chew on another measure of the euro rescue: the ECB’s Outright Monetary Transactions (OMT) programme announced as the court was still dealing with the ESM and the Fiscal Compact. With the programme the ECB said it was ready to buy government bonds of eurozone countries affected by the crisis in order to stabilize their interest levels.
Critics say that this programme violated EU treaties, in particular article 123 of the Treaty of the Functioning of the EU. It is however widely assumed that without this bold move of the ECB the eurozone would not have made it into 2013. What is being questioned though by several groups, among them the NGO “Mehr Demokratie” supported by various organisations and 37.000 German citizens is the legality of the rescue measure. Did the ECB go well beyond its mandate and did it thereby violate the budgetary rights of the German parliament and of German taxpayers? Clearly, these are fair and reasonable questions to ask.
With an impressive line-up including Minister of Finance Wolfgang Schäuble, powerfully eloquent political figures such as Gregor Gysi, the head of DIE LINKE in the Bundestag, and the euro-critic MP Peter Gauweiler, the president of the Bundesbank Jens Weidmann and ECB executive board member Jörg Asmussen, the stage was set for drama in Karlsruhe. The media particularly loved what was framed as two gladiators, reportedly friends from university days in Bonn, confronting each other in the courtroom: Jens Weidmann, well-known for its critical stance on the ECB’s bond buying programme, was the only member of the Governing Council that voted against the programme in the fall of 2012. Jörg Asmussen then has been an articulate and public advocate of the ECB’s programme, making the point that while indeed the mission of the central bank was to work for price stability in the eurozone, there was no point in sticking to a narrow interpretation of the mandate when the eurozone was facing a breakup. There are a number of very complex issues that the court will have to look at in the months to come, and many of them are without precedent. But not surprisingly, German gladiators deliberate even the hottest issues in the calmest way – no big surprises in the courtroom last week.
Politically speaking the issues on the table are certainly powerful, and potentially challenging what has perhaps been the most effective intervention in the euro rescue so far. The weird thing is that while the current German government and all that work for a further recovery of the eurozone certainly long for yet another pacifier made by Karlsruhe, the court might have to disappoint when it announces its conclusions in the fall: de facto, Karlsruhe for now is dealing with a non-issue. So far, the ECB only announced the OMT programme without implementing it in detail, a move that proved enough to prevent the breakup of the eurozone. Can a mere announcement form the basis of a court case? The president of the Federal Constitutional Court Andreas Voßkuhle during last week’s hearings made the point that the court’s power was limited. The ECB was an independent European institution, indicating that it was beyond Karlsruhe’s competence to rule over the ECB’s action. Commentators say there is a chance for the case to be conveyed to the European Court of Justice in the end – which perhaps would bring a different dynamic to the outcome.
What has already been a feature of last year’s deliberations on the ESM and the Fiscal Compact was visible again last week: The highest German judges would perhaps like to stay away from the politics of the euro rescue, but because of the nature of the complaints clearly struggle to do so. Ironically, the ECB would (or should) also be more in its comfort zone in a less politicised role.
The real baffling issue around last week’s shoulder rubbing between Karlsruhe and Frankfurt is therefore the weakness (some would even argue the absence) of politics. Without any doubt, the OMT will not solve the problems of the eurozone in the end. For the eurozone’s governments still to make their case! I am not sure the June summit will bring some of the much-needed decisions and will get back to this.