Europe or Democracy? What German Court Ruling Means for the Euro – part 1

Published on Spiegel Online Ingernational, by SPIEGEL Staff, February 10, 2014.

Germany’s Constitutional Court ruling last Friday marks a significant escalation in efforts to rein in the European Central Bank. The ruling’s message? Either the European Court of Justice has to stop bond purchases or German justices will.

Last Friday, when six justices on Germany’s Constitutional Court cast doubt on European efforts to save the euro, the man who initiated the case was sitting obliviously at his desk. It was only when his secretary burst excitedly into his office that Peter Gauweiler understood that his case had created legal history.

Gauweiler, a member of German parliament who also has a legal firm located in Munich, managed to convince a majority of justices on the court’s second senate that the ECB’s program to save the European common currency is contrary to European law. The court referred the case onward to the European Court of Justice in Luxembourg, a first for the Karlsruhe-based German court. “Karlsruhe has shown ECB President Mario Draghi what a bazooka really is,” Gauweiler crowed … //

… Premature Relief? … //

… Important Boost: … //

… Germany’s Conditions:

The German court’s strategy is clear. Should justices in Luxembourg share the German interpretation, then the Constitutional Court could hide behind the European Court of Justice and pose as model Europeans in the ongoing battle over final jurisdiction on the Continent.

In the case, however, that Luxembourg doesn’t completely share the view articulated in Friday’s verdict, the German court has built a bridge. Should Luxembourg interpret OMT as being “in conformity with primary law,” it could, within the conditions set by the German court, satisfy the Constitutional Court’s concerns, the ruling notes.

Essentially, there are three conditions set by Karlsruhe to ensure that a bond-buying program not be ultra vires: An upper limit to the bond purchases must be set; debt haircuts for the countries in question must be excluded; and the same conditions that apply to recipients of European Stability Mechanism (ESM) aid must apply to those countries benefitting directly from the bond purchases.

It is, once again, the German hardline. The question as to whether such a program would sufficiently impress the markets is one to which Draghi would likely respond in the negative. But can European justices really set binding guidelines? And what happens if Luxembourg accepts only some of the conditions set by the German court?

Should the European Court of Justice come to a different conclusion than that reached by the German court, then the conflict promises to escalate. The German court, after all, has reserved the right to reject a European court ruling should it not fulfill the legal standards applied in German jurisprudence. Such a situation, in which the German high court simply disregards a ruling from the European Court of Justice, would be the worst-case scenario for Europe.
(full text).

Part 2: What About ECB Independence?

Links:

German Federal Constitutional Court, related articles …;

Peter Gauweiler:

  • on en.wikipedia: … In 2008, Gauweiler challenged the German ratification of the Treaty of Lisbon, claiming the treaty unconstitutional. Gauweiler launched a similar challenge to the European Constitution in 2005, but after its failure the Constitutional Court made no ruling and a presidential signature was never given[1][2] …; (with 4 External Links);
  • auf de.wikipedia, mit Weblinks;

Effective Weapon, a graph;

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