Europe's Crisis, Europe's Future

6. Germany: Contraints in the Crisis

110 Whether German politicians and voters like it or not, their country today carries a particular responsibility for the future of Europe. Since a deep and self-intensifying crisis of confidence shattered the euro area in the year 2010, the overall good state of the German economy has become one of the important assets in the European aspiration for new credibility. It is inevitable and completely natural that this constellation results in conflicting views and interests. On the one hand, the countries in crisis want solidarity and support from Germany and the smaller stable countries, such as Finland and the Netherlands; on the other hand, German voters and their representatives fear excessive costs and tend to stress the crucial role of economic responsibility. Given this natural antagonism, this chapter has one key objective: to identify the actual constraints that the German government faces in the European debt crisis. The economic literature has been highly creative in coming up with solutions to the crisis—for example, joint euro area government bond issues (“eurobonds”). Some of these creative solutions, however, may be ignoring the constraints that Germany faces. In this context, the personalization of German positions in the debt crisis (such as the “Angela Merkel position”) may be misleading and could result in unrealistic expectations about the freedom of future German governments, which is determined by voter preferences, constitutional constraints, and dominant economic perceptions. In this chapter I seek to clarify the boundaries for the evolution of German euro policies. Germany: Constraints in the Crisis friedrich heinemann 6 germany: constraints in the crisis 111 The Constitution and the Constitutional Court A primary constraint on German policy is to be found in the country’s constitution , the “Basic Law” (Grundgesetz) and the court responsible therefor, the Federal Constitutional Court (hereafter “the Court”). It is now an almost empirical fact that any significant step toward deeper European integration will be challenged in numerous complaints brought to the Court. The case brought against the European Stability Mechanism (ESM) and the European Fiscal Compact (EFC), had 37,000 plaintiffs, the largest number of parties ever to raise a constitutional complaint, indicating the intensity of the conflict (Schmidt 2013). The Court traditionally defends the autonomy of German constitutional law against claims of the dominance of the European Court of Justice (ECJ) and of European law over national constitutions (Vranes 2013). The Court regularly defines “red lines” for the evolution of European policies that would still be consistent with the German constitution: in its ruling on the Maastricht Treaty, for example, it paved the way for Germany’s participation in monetary union as a “stability community.” If monetary union developed in a way inconsistent with this characteristic of stability, the contractual basis for German participation would be breached, resulting in a German exit as a possible ultima ratio (Herrmann 2012). The Court also asserts the right of an “ultra vires” review of EU secondary law—that is, an examination of whether new legal acts are within the limits of the authority transferred to the European level. The ruling on the Lisbon Treaty also established an “identity review,” an examination of whether the exercise of EU authority endangers the inviolable core of the German constitution (Vranes 2013). As long as these red lines are very abstract and general, they may have few practical consequences. However, the recent rulings on the financial aid package for Greece (2011), the European Financial Stability Fund (EFSF) (2012) and ESM/Fiscal Compact (2012) include not only general principles, but also some very specific conditions for the constitutionality of the new European institutions and procedures. At the same time, the EFSF/Fiscal Compact preliminary ruling also indicates a certain openness to the future development of the European Monetary Union (EMU) and demonstrates judicial restraint on specific risk assessments and policy decisions. A leitmotif of all of the recent rulings is the priority of the rights of the Bundestag, the lower house of the German legislature (Wendel 2013). The principle is that the German parliament must have a continuous and decisive say in all credit and guaranty decisions in all circumstances. The Court stresses thattheBundestagmaynotrelinquishits“parliamentarybudgetresponsibility” 112 friedrich heinemann by means of any kind of vague budgetary authorization. In the Greece and EFSF cases, the Court states that the Bundestag “may not . . . deliver itself up to any mechanisms with financial effect which . . . may result in incalculable burdens with budget relevance without prior mandatory consent...