Eurozone: Karlsruhe plays it safe
12 September 2012
Süddeutsche Zeitung, Frankfurter Rundschau, Die Tageszeitung
The verdict came as no surprise: Germany's constitutional court has green-lighted the European Stability Mechanism (the ESM) and so given the euro a future. But the condition attached is that any increase to the bailout fund must meet with German approval. Initial reactions from the German press.
After two months of deliberations, the Federal Constitutional Court has ruled against the German opponents of the euro. Germany is thus the last country to ratify the European stability mechanism, the ESM, which can now enter into force on October 8. “The markets breathe a sigh of relief,” notes the Financial Times Deutschland, while Spiegel Online reports a “setback for the Eurosceptics.”
The verdict: the permanent ESM bailout fund may be created, but the limit of Germany’s payment obligations may not be exceeded without German approval.
The left-liberal Süddeutsche Zeitung in Munich believes that the key issues remain unresolved. While the judges have indeed confirmed the ESM, they have ignored the overall problem for the ECB of unlimited purchases of government bonds –
The Karlsruhe ruling does not take Europe any further, nor Germany, nor democracy. This judgment avoids, in short, the most important questions. It wants to be a landmark ruling, but fears the fundamentals. It is, as usual with the Federal Constitutional Court when it comes to Europe, a “yes, but” judgment. The ‘yes’ of this judgment this time, though, is as weak as the ‘but’. The judges seek to put a lid on the German liability of 190 billion euros, yet they know that this will be very hard to stick to. It will be hard to stick to because the Karlsruhe lid does not fit the European Central Bank.
For the left-liberal Frankfurter Rundschau, taking a different view, the judgment is “intelligent” and “restrained”. Germany continues to be granted a modicum of control in the ECB, but the main goal has been reached: a future for the euro –
Karlsruhe has [...] arrived at a wise decision. As presiding judge Andreas Voßkuhle said, the political and economic consequences would be incalculable if the ESM bailout funds were prevented from coming into force or even delayed. The Federal Constitutional Court has recognised the high level of uncertainty that characterises all the decisions about the euro. Nobody knows what would happen if the currency union fell apart. The Karlsruhe ruling is stamped by intelligent restraint. There are many arguments for and against solidarity with the countries in crisis. Even the Constitutional Court cannot determine who is in the right. That this must and will remain a political decision is the good news from Karlsruhe.
In any case, notes Berlin’s Tageszeitung, the Karlsruhe judges had no choice but to agree to the ESM, since a collapse of the euro would have resulted in a trillion euros of damage to Germany alone –
There's only one loser: Bundesbank chief Jens Weidmann, who now finds himself wholly isolated. He fought vehemently against the European Central Bank’s purchase of government bonds should interest rates on them rise to dangerous levels. Almost no one in Europe understood this course, but now he is running out of allies even in Germany. The judgment in Karlsruhe was important for taking this euro bailout forward. Nevertheless, the crisis is not over. It’s foreseeable that Greece will need another haircut. And the pursuit of austerity in Europe will deepen the recession. But at least it is now clear that these are political problems that must be solved politically. They have nothing to do with the constitution.