The German Federal Constitutional Court's decision on the Euro Stabilisation Mechanism Act

On 2011-09-07, the German Federal Constitutional Court ruled that the financial aid measures for Greece and the Euro rescue package do not violate the German constitution.

This judgment was eagerly awaited with great interest by the public, because the Constitutional Court had to decide on a number of interesting fundamental questions, e.g. the recurring issue if European law has priority over German national law and what happens if European law violates German constitutional law.

The complainants were some individuals who claimed that the German law that incorporated the European May 2010 decisions to support Greece with bilateral loans violates the German constitution.

1. In order for an individual being able to sue the German state for breach of the constitution, the claimant needs to have an individual constitutional right that is affected by such breach. In this particular case, the key article of the German constitution is article 38 paragraph 1 that states that German MPs are being elected in a general, direct, free, equal and secret ballot; that the MPs are representatives of the people and that they are not bound by any orders or instruction, but instead they must be free to only follow their own opinion and valuations.

This article 38 is understood as the basis of the constitutional right to vote, and consequently, if MPs lose their possibility for free decisions because their decisions are limited by precedents created by the current or previous parliaments, this would as well be an illegal impairment of every individuals fundamental voting right.

The reasoning of the complainants was that the automatism of the Euro Stabilisation Mechanism Act would mean that under the preconditions regulated in this act, very large amounts of state money would be automatically transferred or be bound as security, without the German parliament being able to decide on each individual case of such budgetary measure. Furthermore, the substantial financial transactions based upon the Euro Stabilisation Mechanism Act would bind vast amounts of tax money so that the current and future parliaments could not freely decide on the German budget any more and would thus be limited in their budget autonomy.

2. Another interesting reasoning of the complainants was: the European decisions to support Greece and to build a Euro Stabilisation Mechanism are not based within, and thus not legally justified by the treaties of the European Union because the treaties do not allow such kind of mutual financial support. The German Constitutional Court however avoided taking up this question, saying that the complainants had not provided sufficient facts to support this statement. So, it is still open if the German Constitutional Court would declare decisions of the European Union that are not sufficiently based in the treaties void for application in Germany, saying that such decisions would violate the German's voting rights.

3. After having approved the legitimacy of the claim, the court decided on the justification of the claim as follows:

The Constitutional court sees its own role not as replacing the German parliament's decisions within the parliament's budget autonomy. The parliament has a wide scope of autonomous evaluation and decision within its budget autonomy which is not 100% justiciable, i.e. there is a certain free scope where no court can interfere. The Constitutional Court can only interfere if the parliament makes an evident and fundamental misjudgment or violation of limits within the area of the budget; only such would be seen as justiciable breach of the German constitution and therefore could be declared void by the Constitutional Court .

The Constitutional Court then lists a number of facts to motivate that there was not such fundamental violation of the budgetary limits: the financial maximum for Germany to be blocked as securities, and in the worst case to be paid to other European countries in need, would be 170 billion Euro. According to the Constitutional Court this amount would not be so evidently unbearable for the German budget that it would absorb the present and future parliament's possibility for other budgetary measures and financial decisions. Furthermore, there is no unlimited automatism for additional financial obligations, bypassing the German parliament's right to decide upon the future use of the budget, because the Euro Stabilisation Mechanism Act, enacted by the present parliament, precisely defines purpose, preconditions and amount of possible future financial securities to be granted by Germany.

At last, the German Constitutional Court states it not being acceptable that according to the Euro Stabilisation Mechanism Act the German government only needs to endeavour reaching the parliament's agreement before granting additional financial securities to other European countries. "Endeavor" is not enough according to the Constitutional Court, instead, there needs to be an actual approval of the parliament before the government is entitled to such budgetary measures.

In order to not having to declare the Euro Stabilisation Mechanism Act void due to this unacceptable formulation in it, the Constitutional Court uses a little artful trick, saying that "endeavor" in fact has to be read as "actually reach". This is of course a very liberal interpretation of a rather clear and distinct literal formulation. But in this particular case one tends to accept this approach, considering the alternative: the Constitutional Court knew: had they declared the Euro Stabilisation Mechanism Act void, this would have caused many and very severe consequences, namely insecurity and more instability in the financial market, hectic politicking in the German and European politics and nervousness all around the whole world, facing a possible worsening of the financial crisis in large parts of the Western world.

(c) Dirk Westermann, October 2011