Tuesday, 27 September 2011

German Constitutional Court: no "constitutional blank cheque for further aid packages"

German Constitutional Court rejects challenges against bail-outs

The German Constitutional Court has ruled against the claims that the euro-zone bail-outs are illegal.

However, the court stressed that the verdict “should not be misinterpreted as a constitutional blank cheque for further aid packages.”

The court also ruled that, in order to conform to the constitution, “the Federal Government is in principle obliged to always obtain prior approval by the [Bundestag] Budget Committee before giving guarantees.”

This means that the parliamentary budget committee will have to agree to any future bail-out packages or use of the EFSF, the euro zone’s bail-out fund. This is a big change from the present situation, where the German government needs only to reach a non-binding agreement with the budget committee over any bail-outs.

Additionally, the ruling seems likely to impose further restrictions on Eurobonds or debt mutualisation in the euro zone. The press release states that “the Bundestag, as the legislature, is also prohibited from establishing permanent mechanisms . . . which result in an assumption of liability for other states’ voluntary decisions, especially if they have consequences whose impact is difficult to calculate.”

This seems to suggest that any move towards Eurobonds would be unconstitutional, even with agreement from the Bundestag, though the ruling also hints at greater German control over the fiscal policies of other states that could circumvent such legal restrictions.

A comprehensive overview of the ruling may be found at

No comments:

Post a Comment