From the wires:
12-Sep-2012 09:14 – GERMAN CONSTITUTIONAL COURT SAYS REJECTS COMPLAINTS AGAINST ESM/FISCAL PACT AS LARGELY UNFOUNDED
12-Sep-2012 09:14 – GERMAN CONSTITUTIONAL COURT SAYS ALLOWS RATIFICATION OF ESM/FISCAL PACT UNDER CERTAIN CONDITIONS
12-Sep-2012 09:14 – COURT SAYS GERMANY MUST ENSURE GERMAN LIABILITY TO ESM DOES NOT EXCEED 190 BLN EUROS WITHOUT APPROVAL OF LOWER HOUSE OF PARLIAMENT
12-Sep-2012 09:16 – COURT SAYS BOTH HOUSES OF GERMAN PARLIAMENT MUST BE INFORMED ABOUT ESM DECISIONS
12-Sep-2012 09:18 – GERMAN COURT SAYS REJECTS COMPLAINT AGAINST ECB BOND BUYS
And here’s the judgement in English. The good stuff comes after Para 196.
We’d also point to this piece from Bruegel’s Guntram B. Wolff arguing that there may be cause for an ESM delay in the decision yet due to the requirement that the Bundestag und Bundesrat be fully informed:
In the reading of the court, the three articles could be read in a way that this full information of the parliament is restricted. And indeed, Article 34 grants professional secrecy to the ESM governors, i.e. the ministers, and directors. This would essentially remove them from their obligation to fully inform their national parliament and may even in some circumstances restrict their scope to inform the parliament..
JPM argue however:
…that the requirements to inform the German Parliament can still be met under the current Treaty, and that implementation is unlikely to be delayed in practice. However, arguments such as this will likely resurface, and could potentially be tested if the Bundestag ever feels that it has been cut out of the loop.
Click the pic for the live feed:
We’ll update this after we’ve gone through the full judgement. The court was still reading through the various complaints at pixel time…
Here’s some some background while you wait. From the FT:
Since early July the court had been considering a series of challenges to the [European Stability Mechanism] and the accompanying “fiscal compact”, one of them signed by 37,000 German citizens, making it the biggest protest ever brought before the court.
They are to pass judgment on the ESM, the €500bn rescue fund that is a central plank in the process of resolving the eurozone crisis.
The expectation is for approval with conditionality, based on safeguarding Bundestag sovereignty and limiting Berlin’s financial exposure.
Gauweiler wanted an injunction to block the ESM, claimed the ECB decision would expose German taxpayers to unlimited liability, far beyond the potential exposure via the ESM. He wanted Germany to refuse to ratify the ESM treaty until the central bank reverses its decision, said the FT.
Notably, says RBS, if the court stops ESM ratification, it would be blocking (even temporarily) a law passed with a two-thirds majority in the Bundestag.
Either way this is, as Marc Ostwald at Monument Securities said:
…in truth not a ruling on the legality of these various pacts, but rather (as is in fact always the case) a ruling on the process of their approval in the context of the German constitution and due democratic process in the Federal Republic…
Those wanting a comprehensive background to the courts powers are advised to go here (with a h/t to Lorcan Roche Kelly), while less exhaustively it is enough to say that its clout stems from Articles 23(1) and Article 79(3) of the Constitution of Germany (“the Basic Law”), within which the court wields enormous power.
From Paul Gallagher SC:
Article 23.1 makes conformity with fundamental constitutional principles a condition of integration. It obviously does not require that the EU meet the precise standards of German democracy, rule of law and fundamental rights although the Court has particularly in its Lisbon judgment, made clear that it will not allow a significant deviation from these standards and will not allow the “inviolable core content of the constitutional identity of the Basic Law and Article 23(1), Third Sentence, in conjunction with Article 79(3) of the Basic Law to be infringed”.
Article 79(3) is referred to as the “Eternity Clause”. In effect it provides that constitutional amendments affecting human dignity and the principle of democratic rule are unconstitutional and it contains the highest values of constitutional principles that cannot be altered through the normal amendment process. The provision was introduced by the framers of the 1949 Constitution to prevent Germany slipping back into dictatorship through the use of legal measures as had happened with the Weimer Constitution. It is not possible therefore for any legislation or any national commitment to violate the principles laid down in Articles 1 and 20. Furthermore the only way those Articles can be amended is through Article 146 which involves the German People adopting a new Constitution.
Articles 1 and 20 mentioned above contain the most fundamental principles enshrined in the Basic Law, according to Gallagher:
Article 1 provides that human dignity is inviolable and the State Authority must respectand protect it. The concept of human dignity is very broadly interpreted. Article 20 declares that Germany is a democratic and social federal state and that all state authority emanates from the People and is exercised by the People through elections and voting and by specific organs of the Legislature. It declares that legislation is subject to the Constitutional order and that the Executive and the judiciary are bound by law and justice. It further provides that all Germans have the right to resist any persons seeking to abolish the constitutional order should no other remedy be possible. The generality of the principles enshrined in these articles yields many potential interpretations and therefore confers immense power on the Court.
It is clear from the Court’s Lisbon decision and its subsequent decisions that a reform of the economic and monetary union that affects the core of the Bundestag’s budgetary role can only be realised by way of Article 146 of the Basic Law if it is not consistent withArticle 79(3) of the Basic Law. Compatibility with Article 79(3) and in particular Articles 1 and 20 is therefore essential to the constitutional validity of any EU Treaty. This is the issue that the Court must address in the legal challenges. Recognition of this fundamental issue is essential to an understanding of the role played by the Court in EU affairs.
Twin threats to eurozone stability recede – FT
Bundesverfassungsgericht risk strikes again – FT Alphaville
It’s hotter in Karlsruhe than you think – FT Alphaville
Only the German people can renounce their sovereignty – Telegraph