07 August 2012

Quentin Peel: Germany's judgement day

It will be a seminal moment, not just in the struggle to sustain the euro and stabilise the most debt-laden economies in the 17-nation eurozone that has lasted almost three years. It may also define the relationship between Germany and the rest of its partners in Europe for the foreseeable future.

On the face of it, the judges in the federal constitutional court are supposed simply to decide whether to issue an injunction to delay the establishment of the European Stability Mechanism while they ponder its legality according to the Grundgesetz (“basic law”), as the nation’s constitution is known. They have to do the same for the fiscal stability pact, the parallel treaty agreed in January that lays down strict budget rules for the common currency members.

In effect, however, the five men and three women in Karlsruhe may be sealing the fate of the euro. The ESM cannot come into existence unless and until Germany, its main financier, ratifies the treaty.

The question on this occasion is just how far they will seek to tie the hands of the government and the Bundestag – which in July approved the treaties with a two-thirds majority – in pressing ahead with moves towards a “fiscal union”.

Ms Merkel and Wolfgang Schäuble, her finance minister, backed by their ruling centre-right Christian Democratic Union and the opposition centre-left Social Democrats, argue that only with a fiscal union – implying a further transfer of national budget sovereignty to EU institutions – can monetary union be made stable in the long term.

Andreas Vosskuhle, president of the constitutional court and chairman of the chamber responsible for the European judgements, revealed some of his thinking in a recent interview with the Frankfurter Allgemeine newspaper. Asked about partially transferring budget sovereignty from the Bundestag to European institutions, he said: “There is not much scope left for the transfer of further core competences to the EU. If it were thought necessary to cross this borderline – which may certainly be politically acceptable and desirable – then Germany will have to have a new constitution. For that, a referendum would be necessary.”

Mr Schäuble, too, has dared to raise the prospect of a plebiscite to open the way to further integration. On Monday, Sigmar Gabriel, leader of the Social Democrats, backed a plan calling for the drafting of constitutional changes to be put to a referendum. All the leading parties are pro-European but as the general election of September 2013 approaches, the issue is likely to become more divisive.

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