German finance minister denies pushing ESM deal
GERMAN FINANCE minister Wolfgang Schäuble has denied Berlin is leaning on the constitutional court to expedite its ruling on the European Stability Mechanism (ESM) bailout fund.
After an 11-hour hearing in Karlsruhe on Tuesday, a preliminary ruling is unlikely before September – and then only on whether the court will impose an injunction on Berlin ratifying the ESM. A full ruling into its constitutionality will follow later in the year.
Germany’s highest court is entering uncharted waters, promising a robust preliminary ruling that is likely to indicate the direction the court will eventually take. Rather than the usual three weeks, court watchers say such a process could take up to three months.
This delay has been greeted with gritted teeth in Berlin. Off the record, officials worry that Karlsruhe has disrupted the political reform momentum in Europe. In public, they feel obliged to express understanding for the court’s strategy while warning of the risks associated with undue delay.
“This isn’t just about a constitutional court case,” said Mr Schäuble on national radio yesterday, warning of the ongoing risk of market contagion spreading throughout the single currency area. “The situation remains critical . . . I hope they will decide sooner but no one is exerting pressure.”
For any of the judges listening, though, the finance minister said they would have to answer the question who has the last word: elected politicians or judges.
“Nobody can be allowed to exert pressure on the constitutional court,” he said. “But every judge has his responsibility, just like every member of government, parliament and the federal president.”
Talking up the existential risks facing the euro zone to justify rapid reaction from the court is a new departure for Berlin, regularly accused by its EU neighbours of playing down euro zone risks and dragging its feet.
Asked on the airwaves about this, Mr Schäuble conceded that “no one knew how markets would react” – but said this unpredictability brought its own risks.
“We’re all worried – not just the government but all of Europe – that a delay would lead markets to say, ‘see: the Europeans are too slow, too complicated,’” he said.
Karlsruhe’s strategy has divided the ruling Christian Democratic Union (CDU) into optimists and pessimists.
Gunther Krichbaum, head of the Bundestag EU affairs committee, said it was a “good thing that the court is taking more time with this”. “If they rejected the injunction and the ESM was signed into law it would be a de facto ruling on the ESM itself and reduce the chances of success for complainants in the main case,” he said.
Lawyers for the federal government played down this concern, indicating in Karlsruhe that the ESM treaty contained an exit clause for signatories and was, in addition, subject to exit provisions under the Vienna Convention on the Law of Treaties.
In Berlin’s pessimist camp yesterday was the CDU’s Bundestag budgetary spokesman, Norbert Barthle. “Looking at the situation in Spain and Italy, it’s clear that, if three or four months go by, they won’t have any access to financial markets,” he said. “And then we have a situation that is difficult to control.”
Court attention on Tuesday returned several times to Germany’s total ESM liability of €190 billion in the €700 billion ESM fund, with further contributions possible.
Two years ago, in its European Financial Stability Facility ruling, Karlsruhe suggested that Germany’s total liability in the temporary fund, of a similar magnitude, was manageable and thus acceptable. At Tuesday’s hearing the judges asked whether it was possible to limit ESM exposure.
This goes to the heart of the legal dispute, and Karlsruhe’s final verdict: does the Bundestag retain its budget autonomy and are MPs free to decide over possible future payments into the bailout fund?