Tuesday, June 11, 2013

Karlsruhe will determine the future of the Euro?

I am going through the same experience as I did last September when the German Constitutional Court (GCC) announced to publish its Preliminary Ruling: the very smart people of the media, blogosphere and twitter world again get all excited about this rather abstract event. This commentary from Bloomberg's even goes so far as to suggest that 'Germany's constitutional court in Karlsruhe will this week determine the fate of the euro'.

Come on! Who is trying to drive whom crazy here? What does all of this have to do with the necessary balancing of real economic activity within the Eurozone?

First of all, one should bear in mind that there already has been a Preliminary Ruling and that it is highly unlikely that a Final Ruling would change the results of the Prelimary Ruling. That result was: the ESM is in compliance with the German Constitution (with a couple of attached provisos).

The only question left unanswered in the Preliminary Ruling was whether the ECB's OMT-operations were in compliance with EU laws. Even if the GCC ruled that they weren't, it still has no jurisdiction over the ECB. Such a ruling would have to be passed on to a European Court for judgment.

Somewhere it was suggested that the GCC could rule that Germany has to exit the Eurozone. That certainly made good reading! But don't these people know that courts go by principle and precedent? The precedents of the GCC suggest that they will adhere to a "yes, but..." strategy. And that's probably the smartest thing to do, anyway.

I wish all these very smart people would use their brains to come up with proposals as to how a balancing of the real economies within the Eurozone could be achieved other than by reverting to tricks of monetary policy all the time.


  1. Same people, same nonsense - Frank Schäffler 2011 revisited, for the umpteenth time.

    Many in the the Anglosphere seem to think the GCC is some sort of clone of the US Supreme Court.


  2. Yes, the GCC rules by precedent and cautiously. I'm not expecting any great surprises, but the precedents (in the GCCs previous rulings) are there.

    What I think many people miss about the GCC is just how deeply it deliberates. In some ways, it reminds me more of a think-tank than a court. They started thinking (and ruling) hard about the constitutional limits of european integration way back, in their ruling on the Treaty of Maastricht.

    And in that ruling, they built a constitutional structure, whereby the EU is a "Staatenverbund", of fully sovereign nation-states pooling carefully delineated sovereignties, at european level.

    The delineation of the pooling of monetary policy, such that it did not pool budgetary sovereignty, in the Eurosystem was, in that ruling, very much buttressed on the "No state financing" and "No bailout" clauses in the Maastricht Treaty. Both buttresses have, of course, wobbled - to put it very mildly - in the crisis-handling.

    It seems abstract, yes. But actually it's very much the same set of worries that the more sophisticated Eurosceptics in the UK have been talking about for decades now.

    I can't really tell how much effect this all has on public opinion. German Language boards are, in my experience, absolutely deluged with eurosceptic opinion, peddling often extremely warped information.

    But this extremely active and dominant internet-based public opinion doesn't seem to show up in opinion polls. Neither the Freie Wähler nor the Alternativ für Deutschland has currently hit the 5% mark.