In a press release on July 2nd, the Bundesverfassungsgericht (Germany’s Federal Constitutional Court) announced it would hear the objections of numerous complainants, German lawmakers, academics, and thousands of disgruntled citizens against the Treaty establishing the European Stability Mechanism (ESM). It will rule on September 12. The ESM is supposed to be a permanent institution to provide stability support to an ESM member when its regular access to market finance is impaired or at risk of being impaired (ESM, preamble, art. 13). The economic and political objections against the ESM focus on its potential costs, the required solidarity, as well as the loss of sovereignty. The opposition is strongest in the northern countries of the Euro zone. Saving the problem countries, Greece, Cyprus, Spain and even Italy, is an increasingly costly affair which carries high risks for the northern countries that are called upon to contribute in rescue operations through the ESM. The legal objections that German complainants have put forward, among others, and that the Bundesverfassungsgericht has to evaluate, focus on the democratic deficit that evolves from the ESM, i.e. that the German parliament (Bundestag and Bundesrat) will be confronted with payment obligations in which it has no say. The decision makers and organs of the ESM are insufficiently bound by parliamentary decisions, so the argument goes.
The ESM, however, specifies that the voting rights of ESM members are equivalent to its share in the authorized capital stock (ESM, art. 4.7). Germany contributes a little over 27 per cent of this capital. Furthermore, given that decisions to provide stability support by the ESM, including the policy conditionality have to be taken by mutual agreement (ESM, art. 5.6.f) and that members of the ESM Board of Governors have to be members of the government of the ESM member state who has responsibility for finance, it seems that German’s influence is quite safe and even larger than in other European institutions and policies. The ESM decision mechanism is very similar to the familiar Council of Ministers, an important institution of the European Union, where German ministers carry 8.4 per cent (29 of 345) of the votes. It was this Council of Ministers that in 2004, at the initiative of Germany, undermined the Stability and Growth Pact, which was very clear on the budget deficit norms not being exceeded by 3 per cent. This violation marked the first crack in the governance system of the euro.
The question regarding European influence on Germany’s budget seems to me to be not one of law, even if agreements have to be laid down carefully and appropriately (which makes the Bundesverfassungsgericht ruling an interesting one to await), but of plain politics. Are the Germans willing to release a considerable amount of money to save the euro or not. A majority in parliament is willing. But if a majority of Germans are not, the democratic deficit is German, not European.