German High Court Capitulates to Bankers
Capitulation ignored deep-seated unresolved structural problems.
by Stephen Lendman
As expected, the Court caved. On September 12, headlines reported it. The Financial Times said "German politicians declared the road clear for the creation of the eurozone's (500 billion euro) rescue fund after the country's constitutional court rejected a petition to block it."
At issue is does it matter? More on that below.
Two Eurozone rescue schemes exist. The European Financial Stability Facility (EFSF) is running out of funds. Germany's High Court approved the European Stability Mechanism (ESM).
Originally it was scheduled to take effect July 1. Germany's parliament was still debating it. Constitutional Court approval is required.
It could have linked passage to constitutional law change. Doing so would have required Germany's first post-war national referendum. It stopped short and approved what lacks legitimacy, and in the end won't work.
On the one hand, countries are running out of resources. On the other, the ECB has few bullets left. Everything it tried so far failed. Constitutional approval changes nothing.
With it came conditions. The Financial Times said those imposed appear less onerous than feared. The Court ruled Germany's maximum 190 billion euro liability can't be increased without its ESM representative approving it. According to Court President Andreas Vosskuhle:
"(No) provision of this treaty may be interpreted in a way that establishes higher payment obligations for the Federal Republic of Germany without the agreement of the German representative."
It also insures Bundestag involvement. Under German law accompanying ESM approval, the parliament must approve its representative's positions. It's unclear if full parliamentary or budget committee voting is required.
Another condition mandates that Bundestag and upper chamber Bundesrat (representing federal states) are kept fully informed about bailout fund activities.
Vosskuhle called the Court ruling provisional. Full proceedings will follow. A final decision is expected in December. The Court plans a full review of ESM's legality. At the same time, it said it won't accept ESM interpretations to permit direct ECB borrowing.
Germany is the only Eurozone country that hasn't ratified the treaty establishing ESM. Doing so is required to make it operative. It's likely rubber stamp. Again does it matter?