GERMANY:GERMANY'S HIGHEST court has been asked to postpone its verdict on the European Stability Mechanism – due on Wednesday – until it considers the consequences of the European Central Bank's new bond-buying programme.
Bavarian MP Peter Gauweiler, a leading complainant against the euro zone’s permanent bailout fund, has described the ECB’s bond-buying announcement as an act of “undemocratic self-empowerment” that will effectively see the Frankfurt bank operating as a “hyper rescue fund”.
Mr Gauweiler argued that last Thursday’s ECB decision pre-empts this week’s ruling by the constitutional court in Karlsruhe and undermines the arguments. The court should hold off, he argued, until it can consider the new legal situation or the ECB rolls back its bond-buying.
Mr Gauweiler made his arguments in an injunction on Friday, adding a fresh twist to what was already going to be a closely watched ruling.
The Karlsruhe judges heard oral arguments for and against the €700 billion ESM in early July, and promised an expedited preliminary verdict within three months. A final verdict is due in late autumn but the Karlsruhe judges indicated their preliminary verdict would give a clear signal about the ESM’s constitutionality. Now Mr Gauweiler wants the ESM halted until the full verdict.
With its bond-buying programme the ECB had overstepped its own competences, the MP said, and thrown open questions about parliamentary control over the ESM and bailout liability. The unlimited bond-buying programme of the ECB, in which Germany is the largest shareholder, would effectively bypass liability limits anchored in the ESM. Any final Karlsruhe verdict is likely to hinge on this liability question.
“The ECB has created a totally new situation . . . and the total risk for the federal budget has become even more incalculable,” said Prof Dietrich Murswiek, Mr Gauweiler’s lawyer, in his injunction.
“The ECB will now do without parliamentary participation what was intended for the ESM – and this in unlimited fashion.”
Mr Gauweiler’s last-minute challenge was greeted with incredulity in Berlin. Activation of the ESM, originally intended for July, has been on hold, thanks to German constitutional challenges. Further delays in ratifying the ESM, a cornerstone of euro zone rescue measures, could generate fresh nervousness on financial markets.
Deputy chancellor Philip Rösler said he saw “no connection” between the ESM bailout fund and the ECB programme.
“It’ll be good when the court decides because then we will have clarity,” he told German state television. “All of Europe is waiting for this decision, not just Germany.”
Finance minister Wolfgang Schäuble dismissed Mr Gauweiler’s argument the ECB was now involved in direct state financing.
“One thing is clear: monetary policy can not serve as state financing and this line may not be crossed,” he said.
Mr Schäuble said the ECB’s decision not to name an upper limit on bond-buying was a conscious one to limit “challenges” from financial markets.
