Bloomberg News

Germany’s ESM Role, EU Fiscal Pact Challenged in Court

June 30, 2012

German lawmakers and a democracy group filed suits challenging the country’s participation in Europe’s fiscal pact and the permanent bailout fund after parliament approved the measures late yesterday.

The group “Europe Needs More Democracy” filed a complaint at the Karlsruhe-based Federal Constitutional Court on behalf of about 12,000 people who signed up via the Internet, it said on its website after the bills were passed. Peter Gauweiler, a lawmaker from the Bavarian sister party of Chancellor Angela Merkel’s Christian Democrats, also filed a petition with the court, he said on his website. Opposition Left Party lawmakers also filed a complaint, spokesman Michael Schlick said by phone today.

The plaintiffs claim that the ESM and the fiscal pact undermine the principle of democratic rule and intrude on the powers of German lawmakers. The new instruments overstep the limits the German constitution sets for European integration. The new rules should only take effect if approved by a referendum, the documents contend.

Germany’s parliament approved the laws last night. The measures won two-thirds majorities in both the lower and upper chambers, the Bundestag and Bundesrat, in sessions that stretched until nearly midnight.

Put on Hold

The two measures now await the signature of German President Joachim Gauck, who said June 21 that he would withhold passage pending potential lawsuits to challenge the new laws, as requested by the Karlsruhe court.

The suits also ask the judges to put both laws on hold while they consider their actions.

The plaintiffs rely on a September top court ruling which, while clearing Germany’s participation in the European Financial Stability Facility temporary bailout fund, said parliament must keep control over “elementary budgetary decisions.” Parliament may not relinquish its budget autonomy by “surrendering” to mechanisms that could lead to unpredictable burdens, the judges said at the time.

The court at the time cleared the EFSF because currency union rules didn’t allow the assumption of liability for financial decisions by other states, “including direct or indirect communitization of government debt.”

Germany’s top court has limited Merkel’s discretion in EU bailout policies in at least three rulings. On June 19, the court said the constitution requires the government to have parliament participate in matters of European Union integration, which also covers the ESM.

The judges in February limited the powers of a parliamentary committee set up to approve emergency actions by the EFSF, saying more lawmakers need to be involved.

To contact the reporter on this story: Annette Weisbach in Frankfurt at aweisbach1@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net


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