While all of Europe is waiting for Germany to ratify the European Stability Mechanism (ESM), the European Central Bank (ECB) is inventing an ever more questionable system of creative accounting in order to secure the credit line with the Greek government ensuring that Athens continues to fill the pockets of shareholders of hedge funds and banks ,mainly in London as the Financial Times said on 11 January of this year.
But why is it that Germany, that has always been seen to be pushing for greater financial integration and fiscal austerity, suddenly put on the breaks and halts the enacting of the ESM treaty, which had been tailored by Freshfields Bruckhaus Deringer, a core banking industry major law firm, one may ask?
The reason for Germany’s reluctance to ratify the treaty has to be seen a technical issue rather than a political one. An overwhelming majority of all parties except for Die Linke have voted in favour of the ESM, as did President Joachim Gauck, who, unlike his predecessor Christian Wulff, has expressed no objection to the ESM, and also made headlines saying that he expected that the federal constitutional court in Karlsruhe will find no legal reason to halt it further.
Mr Gauck’s statements were interpreted by many commentators as interference with the supreme court, which made it difficult for the judges to dismiss motions over the constitutionality of the ESM outright. Just to make it look as if the court had painstakingly scrutinised the document that actually is being written, no wonder, in English and complies mainly with Anglo-American and not Roman law, it may have chosen to extend it’s deliberations until 12t September knowing that all EU governments, the European Commission, the ECB and IMF are impatiently waiting for the verdict.
s to dismiss the ESM treaty as anti-constitutional would there be plenty.
First of all, the treaty’s articles 32 and 35 define that financial instruments based on ESM – funds are considered untouchable no matter who might hold them making it impossible to confiscate these making any ‘hair cut’ an illusion.
Furthermore, the members of the governor’s council enjoy a wide-ranging immunity and impunity in regards to any transactions they are executing. On the other hand, the governor’s council can impose it’s decisions on any EU member state, institution or citizen making the application of law a one-way road since no institution, citizen or community may sue the governor’s council over a decision.
In Germany, the principle of division of power as well as the rule of law are fundamental and are protected by the constitution.
But, Articles 10 and 25 of the ESM treaty explicitly state that the governor’s council decides over the volume of the fund as well as the distribution of burdens. National parliaments have no control over the amount of money their state receives from the fund or has to contribute to it.
According to Article 9.3 of the ESM treaty the member states irrevocably and unconditionally have to commit to transfer funds demanded by the governor’s council within 7 days.
In it’s previous ruling of 7 September 2011 (BVerfG, 2BvR 987/10), the German federal constitutional court made clear that the budgetary plan voted on by the parliament, the Bundestag, according to Article 110.2 of the Basic Law is not only an economic plan binding the executive branch but also a sovereign act that the lawmakers can only decide over for a limited time and for specific purposes.
The ESM treaty’s regulations are diametrically opposed to these fundamental rights of the parliament which as a core principle has the budgetary discretion and by this is responsible for the finances of the state in front of the citizens. Any risks that are not in the control of the parliament as well as the government violate the sovereignty of the Federal Republic of Germany. The fiscal pact that accompanies the ESM treaty explicitly demands that member states surrender their budgetary discretion, and, therefore, their sovereignty.
What at first glance may look like a useful tool to discipline governments of defaulting states such as Greece, Portugal, Ireland, Spain, and soon Italy, not only is dreadful for them, but also for the others as they have waived their rights to expand the fund likewise.
The idea of a pan-European solidarity in sharing burdens and debts may sound nice but in reality it means that the banks have all governments on the hook by this mechanism that will eventually spin an ever bigger wheel of public debts being imposed by banks trading credit default swaps (CDS) charging exorbitant interest rates for the re-financing of such debts while the richer states are forced to bridge ever bigger holes. Only beneficiaries are the banks who may think that they invented a financial perpetual motion machine.
Since Greece got ‘rescued’ it’s debts rose by another €25 billion because of this mechanism. To institutionalise this will sooner or later lead to the financial collapse of the European Union. It is just a matter of time.
Germany’s federal constitutional court also has to scrutinise whether Article 38 of the basic law is being violated, since the ESM treaty might pose a threat to undermine the authority of the Bundestag that is meant to represent the political will of the citizens in parliament. And, the citizen’s right to vote is fundamentally violated if the parliament to be elected effectively has no legal or practical power of the state’s finances any more which the basic law is not only containing as a precondition but also shall guarantee. The fiscal necessities arising from the ESM treaty and Fiscal Pact may make make it impossible for any government and parliament to remain sovereign.
In order to protect the basic law, the founders of West Germany’s post WW II constitution also defined the criminal code accordingly. Under § 92 StGB (German criminal code) it is described as “high treason against the federation” to conspire in order to abolish the democratic, sovereign, foundation of the German state based on the rule of law.
Article 20 of the Basic Law states that the “Federal Republic of Germany is a social, federal, state based on the rule of law” continuing to say that “legislation is bound by the constitution, the judicial branch by the law and the executive branch by legislation. The German people have the right of resistance against whoever intends to abolish these principles.”
The banks and hedge funds were cleverly making the financial crisis they created look as if it was a state debt crisis but they should be stopped from imposing ever bigger debts onto our societies forcing richer countries to pay for the bank’s shareholders profit maximisation dreams since even International Herald Tribune headlined on 12 January of this year that the ‘rescue’ funds never reach Athens but will end up in the pockets of hedge funds in London and banks in Frankfurt. One would not need to create such an enormous legal construction in order to surrender the taxpayer's hard earned money to our own banks taking a short detour via Greece, Ireland, Portugal or Spain.