THE GERMAN constitutional court may yesterday have retrospecively cleared the Greek and other EU bailouts, including Ireland’s, from suggestions of unconstitutionality, but in doing so it has set some difficult hurdles on the path of further bailouts and financial integration. On the substantive issue of past bailouts the ruling is very welcome, but it should not be interpreted as a “blank cheque” for future rescue packages, president of the court Andreas Vosskuhle warned.
Future German cash for such funds or any enlargement of the European Financial Stability Facility (EFSF) or its successor from mid-2013, the European Stability Mechanism (ESM), will need the Bundestag budget committee’s approval. And, ominously, it appears implicit in the decision that any move towards the joint issuance of debt, or eurobonds, is likely to face at least a similar requirement, or may even be prohibited. The rationale of the ruling is straightforward – any decision imposing potential financial risk on German taxpayers will require a parliamentary mandate. “No permanent structure based on international treaty,” the court ruled, “can be created that is based on accepting liability for the decisions of other states, particularly when they are linked to an incalculable risk.”
The ruling will understandably be seen by markets as adding to uncertainty about the eurogroup’s ability to take prompt decisions on assistance to member states, not least because some of the 16 other states may also decide to follow suit in strengthening their own parliamentary accountability. The prospect of decision-making being trapped in a gridlock of national legislative mechanisms is troubling and does not bode well for any other strengthening of collective economic governance coming down the tracks as part of the EU’s response to the present economic mess.
There is a real democratic deficit at the heart of the euro project that needs to be addressed, and the ruling does have a certain illusory appeal in that regard. But the court’s defence of German national rights, specifically its veto, reinforces the inter-state, intergovernmental character of the euro rather than its European dimension. Far better, although clearly impossible for a German court, to have addressed the democratic issue by giving the European Parliament, representing EU citizens collectively, a say in such decisions.
The ruling has come as a relief to Chancellor Angela Merkel, currently under remorseless pressure on the bailouts in parliament, from within her CDU party and coalition, and in the polls. On Sunday her party also saw sharp losses in a state election in eastern Germany. Bundestag votes due on the EFSF and ESM are likely to go through, however, and the chancellor was yesterday showing no signs of weakening in her resolve to see a tightening of fiscal discipline ahead of any talk of new collective borrowing. “If we say to ourselves that we need more Europe, a stronger, better Europe in the future,” Dr Merkel told the Bundestag, “then changes to the treaty should not be taboo, to ensure the rules are binding.” That, however, will remain a taboo in Dublin.