The German Constitutional Court’s ruling in detail
Germany’s Constitutional Court today dismissed complaints against Germany’s various participation in support packages for fellow eurozone member states. We print below material issued by the Karlsruhe court in conjunction with the ruling.
Federal Constitutional Court – Judgment of 7 September 2011
Constitutional complaints lodged against aid measures for Greece and
against the euro rescue package unsuccessful – No violation of the
Bundestag’s budget autonomy
In today’s judgment, the Federal Constitutional Court has rejected as unfounded three constitutional complaints which are directed against German and European legal instruments and other measures in connection with the aid to Greece and with the euro rescue package.
The Second Senate of the Federal Constitutional Court has decided that the Monetary Union Financial Stabilisation Act (Währungsunion-Finanzstabilisierungsgesetz), which grants the authorisation to provide aid to Greece, and the Act Concerning the Giving of Guarantees in the Framework of a European Stabilisation Mechanism (Gesetz zur Übernahme von Gewährleistungen im Rahmen eines europäischen Stabilisierungs-mechanismus), hereinafter: Euro Stabilisation Mechanism Act (Euro-Stabilisierungsmechanismus-Gesetz), which relates to the euro rescue package, do not violate the right to elect the Bundestag under Article 38.1 of the Basic Law (Grundgesetz – GG).
By adopting these Acts, the German Bundestag did not impair in a constitutionally impermissible manner its right to adopt the budget and control its implementation by the government or the budget autonomy of future Parliaments.
However, § 1.4 of the Euro Stabilisation Mechanism Act is only compatible with the Basic Law if it is interpreted in conformity with the constitution. The provision is to be interpreted to the effect that the Federal Government is obliged to obtain prior approval by the Budget Committee before giving guarantees within the meaning of the Act.
Furthermore, the Senate determines the boundaries under constitutional law for authorisations to give guarantees for the benefit of other states in the European monetary union.
In essence, the judgment is based on the following considerations:
I. Scope of review / admissibility
The Senate regards the constitutional complaints which have been lodged as admissible only to the extent that the citizens, invoking their right to elect the Bundestag, which is protected by Article 38 GG, challenge a loss of substance of their power to rule, as it is organised in a constitutional state, by a far-reaching, or even comprehensive, transfer of duties and authorities of the Bundestag. Article 38.1 GG protects competences of the present or of a future Bundestag from being undermined, which would make the realisation of the citizens’ political will legally or practically impossible.
In principle, there is a threat of the act of voting being devalued in such a way if authorisations to give guarantees are granted in order to implement obligations which the Federal Republic of Germany incurs under international agreements concluded in order to maintain the liquidity of currency union member states. The Senate was permitted to leave undecided under what preconditions constitutional complaints lodged against a supplementation of primary Union law by measures outside the Treaty structure may rely on Article 38.1 sentence 1 GG.
In this respect, the complainants have not presented a concrete context which indicates a supplementation of primary Union law by measures outside the Treaty structure that is due to the impugned measures. Also with regard to a possible violation of the fundamental right to property (Article 14 GG), the complainants have not sufficiently presented facts from which it follows that the challenged measures might result in objectively impairing the euro’s purchasing power to a considerable extent.
To the extent that the constitutional complaints impugn not only the two pertinent Acts of the German Bundestag, they are inadmissible because they lack a suitable object of complaint.
II. Standard of review
Article 38 GG demands, in connection with the tenets of the principle of democracy (Article 20.1 and 20.2, Article 79.3 GG), that the decision on revenue and expenditure of the public sector remain in the hand of the German Bundestag as a fundamental part of the ability of a constitutional state to democratically shape itself.
As elected representatives of the people, the Members of Parliament must remain in control of fundamental budget policy decisions in a system of
inter-governmental governance as well.
When establishing mechanisms of considerable financial importance which can lead to incalculable burdens on the budget, the German Bundestag must therefore ensure that later on, mandatory approval by the Bundestag is always obtained again.
In this context, the Bundestag, as the legislature, is also prohibited from establishing permanent mechanisms under the law of international agreements which result in an assumption of liability for other states’ voluntary decisions, especially if they have consequences whose impact is difficult to calculate.
Every larger-scale aid measure of the Federation taken in a spirit of solidarity and involving public expenditure at international or European Union level must be specifically approved by the Bundestag. Sufficient parliamentary influence must also be ensured with regard to the manner in which the funds that are made available are dealt with.
The Senate, which, with a view to the procedural setting of the proceedings, was barred from reviewing the impugned Acts against provisions of Union law, nevertheless points out that the existing European Treaties are not contrary to an understanding of the national budget autonomy as an essential, inalienable competence of the directly democratically legitimised parliaments of the Member States but that they, on the contrary, require the existence of such competence.
Strict observance of the European Treaties guarantees that the actions of the institutions of the European Union have a sufficient democratic legitimation in Germany and for Germany. In this context, the Senate also points out that the conception under the Treaty of the currency union as a stability-oriented community is the basis and the object of the German Act approving the Treaty, as the Senate has already made clear by its Maastricht ruling (Decisions of the Federal Constitutional Court.
When establishing a prohibited relinquishment of budget autonomy, the Federal Constitutional Court cannot put itself in the place of the legislature with an expertise of its own.
With regard to the extent of the assumption of guarantees, it has to restrict its review to evident transgressions of ultimate boundaries. In this context, the legislature has a margin of appreciation with regard to the probability of having to make payments in a guarantee event, which the Federal Constitutional Court has to respect.
Something similar applies to the assessment of the future sustainability of the federal budget and of the economic performance of the Federal Republic of Germany.
Taking this legislative priority of appreciation into account, and measured against the constitutional standards that have permissibly been applied, both the Monetary Union Financial Stabilisation Act and the Euro Stabilisation Mechanism Act prove to be compatible with the Basic Law. The Bundestag did not deplete its right to adopt the budget and control its implementation by the government and did not disregard the essential
content of the principle of democracy.
It cannot be established that the amount of the guarantees given exceeds the limit of budget capacity to such an extent that budget autonomy would virtually be rendered completely ineffective. The legislature’s assessment that the authorisations to give guarantees to the amount of a total of approximately €170bn are within the capacity of the federal budget does not transgress its margin of appreciation and is therefore constitutionally unobjectionable.
The same applies to the legislature’s expectation that even in the case of the complete realisation of the guarantee risk it would still be possible to refinance the losses through revenue increases, cuts in expenditure and longer-term government bonds.
At present, there is also no reason to assume an irreversible process with consequences for the German Bundestag’s budget autonomy.
The German Act Approving the Treaty of Maastricht in the version of the Treaty of Lisbon still guarantees in a manner that is sufficiently definite under constitutional law that the Federal Republic of Germany is not subjecting itself to an incalculable automatism of a liability community which follows a course of its own that can no longer be steered.
Neither of the two impugned Acts establishes or consolidates an automatism by which the Bundestag would relinquish its right to adopt the budget and control its implementation by the government.
The Monetary Union Financial Stabilisation Act restricts the authorisation to give guarantees with regard to their amount, it indicates the objective of the guarantee, provides, to a certain extent, for the payment modalities and makes certain agreements with Greece the basis of the giving of guarantees. Thus, the content of the authorisation to give guarantees is defined to a large extent.
The Euro Stabilisation Mechanism Act lays down not only the objective and the fundamental modalities, but also the amount of possible guarantees.
The giving of guarantees is only possible during a certain period of time, and it is made contingent on agreeing an economic-policy and finance-policy programme with the Member State affected. The programme requires mutual agreement of the euro currency area states, which secures a determining influence to the Federal Government.
However, § 1.4 sentence 1 of this Act merely obliges the Federal Government to strive to reach an agreement with the Bundestag’s Budget Committee before giving guarantees. This is not sufficient. Instead, guaranteeing parliamentary budget autonomy requires an interpretation of this provision in conformity with the constitution to the effect that the Federal Government is in principle obliged to always obtain prior approval by the Budget Committee before giving guarantees.