The German Constitutional Court Rules Against Euro Hysteria

german constitutional court

Photo: (AP Photo/dapd/ Wittek)

Chancellor Angela Merkel did the right thing. She left Germany and flew to Indonesia. While Germany was in turmoil. The bailout policies she and her government had pushed through and that parliament had passed just after the EU summit ran into discord, accusations, and threats. Everybody was applying pressure.The Federal Constitutional Court would have to decide. On Tuesday, it began its hearings on the permanent European Stability Mechanism (ESM) and on the fiscal union pact. A high-urgency, top-priority, super-rush hearing, restricted to oral arguments to speed things along. Very unusual for the Court. A sign it was taking the time pressures seriously.

Plaintiffs had swarmed the Court from all sides: the Left, conservative Peter Gauweiler (CSU), former Minister of Justice Herta Däubler-Gmelin (SPD) with the association More Democracy, representing now over 23,000 citizens, and the Association of Tax Payers. They claimed that the Bundestag, in passing the laws, had transferred critical parliamentary rights—controlling the national budget—to other organisations, thereby curtailing the rights of voters to participate democratically in budget decisions. [Read…. The “European Monster State“].

Andreas Voßkuhle, President of the Constitutional Court, opened the session with a stunner: time. It would be impossible to examine all the issues and rule on the constitutionality of the laws in the time expected due to their complexity. Instead, the Court would decide by the end of July whether or not to grant an injunction that would prevent President Joachim Gauck from signing the laws. Then it would take another three months to rule on the constitutionality of the laws.

Yet the ESM was supposed to be operational by July 1. It had been ballyhooed as the insurmountable firewall that would keep contagion at bay. It was supposed to save the Eurozone, and by extension, the economy of the world.

Outside the court room, it was a veritable slugfest. Bundestag President Norbert Lammert (CDU) warned of “hefty consequences” not only for Germany but also for the entire European system of treaties, if the court stopped or delayed the ESM.

“It would be politically and economically fatal,” said Helmut Brandt, CDU delegate. “Every judge knows what this is about,” said Christian Ahrendt (FDP). President Gauck was “happy” that the court was looking at the laws; instead of supporting Merkel, he showed a preference for the plaintiffs’ position.

And European parliament delegate Alexander Graf Lambsdorff (FDP) complained that the justices were not always “sufficiently familiar” with all the processes in Europe and occasionally arrived at “erroneous judgments.”

Then there were those who lashed out against those who’d lashed out against the Court: “The Law in Europe has been continually stepped on during the euro crisis,” warned Frank Schäffler (FDP). “That doesn’t have to be repeated in Germany in that the Constitutional Court is maligned.”

CSU legal expert Thomas Silberhorn told Bild, “The highest German court doesn’t need anyone’s political advice but everyone’s respect for its independence and dignity.” Horst Seehofer, head of the CSU and Minister-President of Bavaria, resented what was said over the last few days in public; it was “unappetizing,” he said, “certain that the justices would correctly evaluate things.”

Inside the court room, experts had five minutes each to present their case orally. Finance Minster Wolfgang Schäuble warned that stopping the ESM could lead to “considerable economic upheaval with unpredictable consequences for Germany,” similar to the crisis of 2009. Doubts on Germany’s ability or willingness to preserve the stability of the Eurozone could aggravate “crisis symptoms” and could lead to “more forceful speculation” that some nations would exit the Eurozone. And it “could lead to significant insecurity in the markets.”

He tried to push the court to make a quick decision not only on the injunction but also on the constitutionality of the laws. But Voßkuhle slapped down his efforts. Yes, foreign media would misinterpret it if an injunction were granted, he said. “We’re all seeing the headline: Euro Bailout Stopped by Germany.'”

Bundesbank President Jens Weidmann spent his five minutes dialling down the drama. Estimating the consequences of stopping the ESM was “highly speculative,” he said, and part of the delay of the ESM was “already priced in” by the financial markets. Further, the EFSF would suffice for the immediate needs of Spain and Cyprus, he said.

On the other hand, the ESM wasn’t a panacea anyway, he said, and a “quick ratification wouldn’t guarantee that the crisis didn’t get worse.” State guarantees were only credible if markets believed that payment obligations would be fulfilled. And the fiscal union pact was “not sufficient” to guarantee that there would be a “solid foundation for the monetary union.”

So calm down, everyone, he seemed to say. Even if the Court ruled for the laws in no time, it wouldn’t solve the Eurozone debt crisis. And if it ruled against the laws, it wouldn’t be such a big deal.

After eight hours of discussions, it was clear: the court wasn’t eager to decide. The decision might be condemned by politicians and entail crashes cascading around the world. Even a mere injunction could be interpreted as a decision to scuttle the European bailout policies. Hence, the court’s play for time: it would allow euro hysteria to settle down, and markets could get comfortable with all possible outcomes. So the court’s first decision—more time—was its first major response in an era of euro chaos, hectic summits, frantic bailouts, failed mechanisms, and hasty treaties.

Germany and France exist in two different universes, apparently: France, safely ensconced in a Eurozone without bailouts and with nary a debt crisis on the horizon, debates its social model. Germany sees a Eurozone ravaged by a debt crisis with mind-boggling bailout costs that stir up a furor on all sides, and everything is getting questioned, even the euro itself. Read…. France, Germany, And The Reintroduction of the D-Mark.

And to sprinkle some humour into that dogged Eurozone drama, here is “Merkel at Wimbledon 2012,” a funny video by down-under comedians Clarke & Dawe.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.