Constitutional law strengthens the rights of the German Parliament once again
A strong emphasis on the position of the German Parliament in the context of European integration runs like a leitmotif through the case law of Germany’s highest court. It is confirmed that the Bundestag has comparable weight in relation to measures affecting the budget.
On 7 September 2011 the eyes of Europe turned once more in anticipation to Karlsruhe as the German Federal Constitutional Court pronounced its judgment in the case “Aid measures for Greece and euro rescue package”.
In May 2010 the Eurozone Member States decided, in the context of a three-year programme of the International Monetary Fund (IMF), to make significant financial assistance available and promised to support Greece with bilateral loans. In this context Germany needed a law to empower its Federal Ministry of Finance to take on guarantees (€22.4 billion) for loans to Greece. In the same month the Ecofin Council resolved to create a European Stabilisation Mechanism, comprising the European Financial Stabilisation Mechanism (set up on the basis of an EU regulation) and the European Financial Stability Facility (EFSF). The EFSF is a special-purpose vehicle for the distribution of loans and loan facility agreements based on an inter-State agreement among the euro-area Member States. To allow Germany to take on guarantees to secure loans (€147.6 billion), a basis for authorisation was also needed here, and this was created in the form of a Guarantee Commitment Act in the Framework of the European Stabilisation Mechanism. The Federal Constitutional Court had to assess the conformity of both laws with the German Basic Law.
Significance of the Bundestag’s budget responsibility
In its judgment, Germany’s highest court focuses on the budget responsibility of the Parliament. From the right to vote (Article 38 GG [Grundgesetz – Basic Law]) in combination with the essential concepts of the principle of democracy (Articles 20 (1) and (2) and Articles 79 (3) GG), the Senate deduced that the elected representatives of the people could not waive their parliamentary budget responsibility in a way that could compromise their powers, or those of future Parliaments, of autonomous budgetary management. The Constitutional Court has thus clearly rejected a transfer of responsibility for the budget through indeterminate budgetary-policy authorisation of other actors. Similarly, the Bundestag would not be allowed to approve permanent mechanisms by international agreement which amounted to assuming liability for voluntary decisions made by other Member States. The judges in Karlsruhe emphasised that any aid measure involving solidarity and affecting expenditure would require a decision in Parliament, and it would also be necessary to maintain adequate parliamentary influence over the manner of dealing with the funds thus made available. The Bundestag’s responsibility for integration regarding the transfer of powers to the EU found its counterpart in measures with budgetary impact of comparable weight. Far from posing an obstacle to this understanding, the European treaties actually encourage it. The Court thus made it clear once again that the prerequisite for membership of a – supranationally organised – inter-State community is that the provision of legitimacy and exertion of influence by the people are also safeguarded within a union of States (cf. Maastricht Judgment, Federal Constitutional Court 89, 155).
No upper limit for liability commitments in the German constitution
The political world and the financial markets had waited with anticipation for any possible statements by the Constitutional Court concerning an upper limit for present and future guarantee commitments on the part of the German State. No such upper limit is, however, specified in the German Basic Law. The judges have made it unmistakably clear, though, that this is no carte-blanche authorisation for guarantee undertakings. In support of the principle of democracy, which is held to be unchangeable (Article 79 (3), Article 20 (1) and (2) GG), the judges do however indicate the limit for liability commitments under which present and future budgets impose disproportionate limitations on acting on themselves. The restriction of the Court’s review to “evident transgressions” (as it was termed) goes hand in hand with respecting a margin of appreciation proper to the legislature with regard to the risk attaching to guarantee commitments that have been entered into. Using this basis for assessment, the judges have come to the conclusion that the commitments made so far are admissible. Even in the event of full realisation of the guarantee risk, they could still be refinanced through revenue increases, cuts in expenditure and longer-term government bonds, albeit with a loss of growth opportunities and creditworthiness with corresponding revenue losses and risk premiums.
Consequences of the judgment for the European debate
In the case at hand, the Court has concluded that the laws presented in this specific case do satisfy the constitutional requirements. Nevertheless, the responsible actors in Germany will need to study this decision closely when issues such as Eurobonds, for example, come under scrutiny. The question is: How much European integration is feasible, given the Basic Law?
Translated from the original German