Unlimited Liability: German Parties Offer Rival Interpretations of Euro Ruling

September 20th, 2012

Published on Spiegel Online International, REPORTED BY DIETMAR HIPP, PETER MÜLLER, CHRISTOPH PAULY, CHRISTIAN REIERMANN, September 17, 2012.

The German government is pleased with the recent decision by the country’s Constitutional Court that gave the green light to ratify the permanent euro bailout fund. But the celebration may be premature. Some of the conditions set by the court could prove prickly for the government and its final ruling on the case could come with unpleasant surprises … //

… Those Who Think More and More Can Be Given … Are Fooling Themselves:

Bavarian Finance Minister Markus Söder, long an outspoken critic of the federal government’s euro policies, would like to see the Bundestag placed under supervision, providing Germany’s central bank, the Bundesbank, with the ability to express its concerns about German aid programs. The Bundesbank, he says, could “oversee how Germany abides by its upper ceiling on liability,” Söder said in a SPIEGEL interview.

At a meeting of his party later this week, CSU party chief Seehofer would like to push his party to adopt this line officially. “Those who think after the Constitutional Court’s ruling that more and more can be given in the euro-rescue efforts are fooling themselves,” he rants. “We can’t demand domestic reforms from Germans like increasing the age of retirement to 67 and expect them to accept pay freezes and then assume unlimited debt for other countries.”

It is the ECB’s decision to purchase unlimited bonds from debt-ridden euro-zone nations that Seehofer is targeting the most with his criticism. “With this decision, the ECB has entered into the political arena, and now it is also going to have ensure that it has political support,” he said. In the Eurotower in Frankfurt, where the ECB has its headquarters, officials are looking south towards Bavaria with concern. ECB chief Draghi even requested that his staff ask Seehofer if he was interested in meeting with the central banker.

Budget Havoc? … //

… Euro Zone States to Agree to Liability Cap:

What has already been clarified, however, is how the government will deal with the demand from the Karlsruhe court that the upper ceiling for German liability at the ESM be capped at €190 billion and that this requirement be made binding under international law. During a meeting on Friday of the 17 euro-zone finance ministers in the Cypriot capital Nicosia, Schäuble encountered a surprising amount of goodwill. One of his deputy ministers barely had a chance to explain what the justices were demanding when Austrian Finance Minister Maria Fekter piped in: “We also want a statement like that.” The Dutch finance minister also joined in.

By the end of the meeting, the finance ministers said that they would agree on a statement by the beginning of October addressing the German Federal Constitutional Court’s concerns as well as the rights of other countries. “There will be a general declaration that applies to all the euro countries,” said Fekter. Then, on Oct. 8, the ESM can go into operation.

At that time, it will also be possible to make a bailout program available for Spain. Madrid’s application at the ESM for aid would also be the prerequisite for the ECB to purchase the beleaguered country’s sovereign bonds on the markets. There could be a few hitches here, too, however. Spanish Prime Minister Mariano Rajoy would love to receive aid from ECB chief Draghi, but he also doesn’t want to submit to the usual conditions imposed in an ESM bailout program — including monitoring by the troika, comprised of representatives of the European Commission, the ECB and the International Monetary Fund.

In Berlin, however, many members of parliament within the parties that are part of Merkel’s coalition government want to insist on precisely those conditions for aid. “We can only agree to applications for ESM bailouts if there is a fully valid reform program that is controlled by the troika,” says Michael Fuchs, the deputy whip of the joint party group for the CDU and the CSU in parliament. That, Fuchs said, was the mandate the Constitutional Court had issued to members of parliament.
Right after Wednesday’s ruling, Merkel and Schäuble, who are also both members of parliament with the conservatives, warned against agreeing to any bailout packages in Brussels that included watered-down conditions. They said it would not be possible to get backing from the German parliament for any such packages.

With some members of parliament threatening to rebel, an open dispute between the chancellor’s CDU and its CSU sister party, and new risks for the federal budget, it is clear the those seeking to save the euro still have to clear a few hurdles ahead of them despite the Constitutional Court ruling.
(full text).

Links:

Hit Syria – Target Russia, on Current Concerns, Interview with Professor Andrei Ilyich Fursov, September 10, 2012;

Speaking of tax CDs: How to become more intelligent, by gs, September 10, 2012;

White drinking milk from green roughage, on Current Concerns, by Heini Hofmann, September 10, 2012.

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