Germany feels sure about European rescue fund- not ECB’s OMT

After two years of internal discussions, judges of Constitutional Court felt sure at least that the European Mechanism of Stability does not jeopardize German Parliament’s rights to decide about budgetary questions, whenever this institution holds decision taking power over that permanent rescue fund. German authorities also consider that European fiscal pact complies with the country’s law, but the European Central Bank’s bond purchase program remains out of this argument. This war is expected to continue for a long time.

According to German’s court sentence, national contribution to this rescue fund will have to be limited to a maximum of €190 billion, which means 27% of total guarantees, and of course any increase will be subject to the Bundestag’s approval. Therefore, the High Court has supported his 2012’s September temporary decisión, in which opted not to force ESM’s cancelation.

The European Mechanism of Stability was signed in July of 2011, and the euro zone’s fiscal treaty six months later. Draghi’s commitment to do what’s needed to put down euro area’s risk premiums’ climbing came on September 6th of 2012. The questioning of these three European measures by the Constitutional Court have walked hand in hand, except for the fact that the rescue fund and the fiscal pact were transposed to German legislation but not the ECB’s bond purchase program. Furthermore, last month it was announced that the appeal against the OMT would be derived to a different legal path because it is incompatible with primary European law, and consequently out of ECB’s mandate.

Therefore, Karlsruhe’s court has required European Court of Justice at Luxembourg to take a decision on central bank’s program and to do it against. With this aim, the Bundesbak has provided Germany’s Constitutional Court the perfect tool: a more economic than legal, but thoughtful report. It mainly points out to Luxembourg judges that their sentence should be “restrictively interpreted in the light of European treaties.”  Not a trace of arguments on economy.

Considering the extent as well as the specific nature of this legal dispute between Karlsruhe and the European Central Bank- it does not involve an actionable legal act-, it is time to celebrate that the European rescue fund is legal at last.