Germany’s top constitutional court rejected a last-minute bid to delay a case over the European Stability Mechanism, clearing the way for a ruling on the 500 billion-euro ($640 billion) bailout plan tomorrow.
The Federal Constitutional Court in Karlsruhe said today it would issue its ruling on the ESM as scheduled at 10 a.m. tomorrow, without further comment on the bid to delay the case by lawmaker Peter Gauweiler. He argued the court should delay the ruling after the European Central Bank pledged unlimited funds to buy government bonds.
Germany hasn’t ratified the ESM treaty and if it can’t join the mechanism won’t be created, and other bailout measures might be thrown into doubt. Last week, ECB President Mario Draghi announced the central bank was ready to buy unlimited quantities of short-dated government bonds of nations signed up to rescues from the ESM or the temporary European Financial Stability Facility it is designed to replace.
“It’s no surprise the court won’t change its plan,” said Christoph Ohler, a professor of European law at Jena University. “You cannot directly sue over the acts of European institutions in a German court, so it’s difficult to introduce these arguments in this case.”
The judges will rule tomorrow on whether Germany may ratify the ESM, the final hurdle for the plan to rescue indebted euro- area member states. The euro gained 0.3 percent against the dollar to trade at $1.28 as of 11:07 a.m. in Frankfurt.
Gauweiler, a conservative lawmaker from Chancellor Angela Merkel’s Christian Democratic bloc, didn’t immediately reply to an e-mail seeking comment.
The decision to press ahead with the ruling will probably bolster the German government’s faith that the bailout facility will get the court’s backing. German Finance Minister Wolfgang Schaeuble told students last week he was confident the ESM would be approved.
“Europe won’t collapse on Sept. 12,” Franz Mayer, a law professor at Bielefeld University, said in an interview last week. “In the end, the court will allow Germany to ratify the ESM, but there will probably be some strings attached.”
Schaeuble, a lawyer by training, told students in Strasbourg on Sept. 3 he sees “no constitutional issues” with the ESM.
So far, the court has cleared each step of European integration. Last year, the judges approved the Greek bailout and the EFSF, while saying Germany may not agree to take over unlimited future liabilities incurred by other EU member states.
“The bigger issue than the actual ruling is what extra language the court will add to the reasoning on where the limits are in the future,” said Mayer. “The markets seem to be quite afraid the judges may spoil certain options for the future, like collectivization of debt within the euro zone.”
The cases were filed after German lawmakers approved the ESM and the Fiscal Pact, a treaty designed to impose budget discipline on EU member states. About 37,000 people signed up to endorse a constitutional complaint filed by political group “Mehr Demokratie e.V.” Other plaintiffs include opposition party Die Linke as well as Gauweiler.
The court has chosen six cases for tomorrow’s ruling. At this stage, the judges only have to decide whether to halt ratification of the treaties while reviewing the suits more closely.
The judges may make parliament take steps to assess future liabilities, Ohler said. This could include taking into account how much the ECB’s new bond purchase program may cost German taxpayers, he said.
“Court cases are about things in the past, and the court isn’t likely to interfere with what has been decided by the lawmakers,” said Ohler. “Rather, they will tell them what to do in the future: making sure that Germany keeps its financial autonomy.”
In previous cases over EU bailouts, the court took only hours or days to reject preliminary motions, while taking more than a year to decide on the overall legal issues.
In the current ESM cases the judges held a one-day hearing in July on the preliminary bid and took two months to deliberate. The extended time period indicates the court may try to tackle most legal issues at once, said Axel Kaemmerer, a professor at Bucerius Law School in Hamburg.
“The judges will have to address the key question to what extent does Germany relinquish its financial autonomy, how much power is left to decide on financial actions it will have to take in the future,” Kaemmerer said.
The plaintiffs argue the treaties undermine the autonomy of Germany’s parliament and democratic self-rule. They rely on last year’s top court ruling which, while clearing the rescue measures in place at the time, said parliamentary decisions about taxing and spending are a central part of self-government. Members of parliament are representatives of the people and must remain in control of “elementary” budgetary decisions, the judges said.
Last week’s ECB bond buying announcement is unlikely to change the court’s decision, Mayer said. Previous ECB bond purchases were discussed in earlier cases, which didn’t lead the court to rule against bailout measures, Mayer said.
The ESM requires its members to shoulder the burden of nations that don’t pay their share. Those rules could be critical issues in tomorrow’s ruling, according to Kaemmerer.
“That’s a vulnerable flank,” he said. “There’s a risk that the court will find those rules don’t concretely specify what Germany has to pay in the end.”
To contact the reporter on this story: Karin Matussek in Berlin at email@example.com
To contact the editor responsible for this story: Anthony Aarons at aaarons@Bloomberg.net.