Page 2 of
2 COMMENT An unlawful bet on the
euro By Gunnar
Beck
Moreover, ECB President Mario Draghi
has already indicated that he would take bond buys
by the ESM as a green light that the ECB would be
no longer bound by the restrictions of Article
123. As present the ECB has about 40 billion euros
in sub-standard Greek government bonds on its
balance sheet, in addition to a much larger
undisclosed figure of 'shaky' government debt
instruments deposited by banks as 'security' for
ECB loans. 'Draghiavelli' refuses to disclose the
breakdown of government debt on the ECB's books or
their credit rating.
The ESM Treaty
effectively provides for the mutualization of
national debt within the EU with no upper limit.
Save for
Eurobonds, there could be
no more flagrant violation of the 'no bail' clause
of Article 125 TFEU.
Unless wages in the
eurozone can be depressed significantly, inflation
will eventually rise significantly due the
combined effect of an increase in the money supply
and a depreciation of the euro with resulting
increases in import prices, especially, oil and
gas prices. That trend will accelerate every time
the ECB fires its 'big bazooka'. Draghiavelli is
inaugurating the 'lira-fication' of the euro, the
redefinition of the eurozone along Italian lines.
Nothing could be more antithetical to the original
'Bundesbank' model for the ECB, and Article 127 of
the TFEU, which states that price stability and
the maintenance of the purchasing power of the
euro are the primary objectives of the ECB.
The ESM manifestly breaches German
constitutional law as well as the EU Treaties.
Indeed, violations of the Constitution rarely come
so clearly. Yet, few observers expect the
constitutional court to say so, although many
think it may ask for more or less cosmetic
changes. If implemented, the ESM will reverse the
greatest nineteenth century political achievement
in almost European countries: the transfer of the
powers of determining taxation and expenditure
from unaccountable monarchical government to more
or less elected and accountable parliaments. That
transformation will have taken place through
systematic disregard for multiple legal and
constitutional safeguards which were designed to
prevent precisely the kind of disaster that has
now befallen the eurozone. Germany's entire
political establishment is committed to
dismantling what remains of Germany's postwar
economic success in one last throw of the dice to
save the euro and appease the financial markets.
The constitutional court alone can prevent them
from betting the house to save the garage. Law,
however, one is well advised to remember, is also
the continuation of politics by other means.
To sum up: question is not whether the ESM
is unconstitutional - it manifestly is - or
whether the ECB is acting unlawfully - it patently
does, and even International Monetary Fund
Managing Director Christine Lagarde has said that
"to save the euro, the law had to be (and is
still) broken" - but whether the constitutional
court will take the German Constitution, the
German voter, and itself, seriously. This is as
far legal analysis and a sound mind take one if
one has no insider knowledge. And if the question
is clear, what is the answer?
Well, the
diligent, knowledgeable and na๏ve legal academic
will think: If the law is clear, then the court
will enforce it. His conclusion will be that the
ESM Treaty should and will be struck down. Anyone
who does not only know the law but something more
about the law, will be less sure: he will know
what the legal answer should be but is aware that
the world is not as it should be, of the pressures
the court is under, the fact that all members of
the second senate of the court are party political
appointments - all appointed by parties which have
been supporting the ESM - and that courts are not
in the habit of causing constitutional crises.
If he is an optimist and believes in the
integrity of the judicial process the academic may
think the odds are 50:50 as the court will have to
justify its decision in legal terms and that it
would be difficult to justify a judgment that the
ESM would not abridge parliamentary budgetary
autonomy if Germany's potential liability could
exceed the sum of the annual federal budget by a
factor of more than two.
If, like the
author, he is a realist, has no illusions about
the ostensible 'rule of law' in the West, knows
that Germany still is not a sovereign country and
that lawyers are rarely heroes, and yet resists
the misanthropic conclusion that there is only
injustice and opportunism, then he may think that
if the breach of the Constitution is so patently
obvious, there must be at least in a one-in-five
or one-in-four chance that the court, unlike
Shakespeare's 'Elbow', may not "lean heavily upon
justice".
Ultimately no degree of legal
analysis or political realism will provide the
answer. For there is substitute for insider
knowledge, which here means personal knowledge of
the motives guiding the individual judges and
personal contact with them or with those who know
them. By now - less than a week before judgment
day - the court has taken its decision, and there
will be those in the know who are not members of
the second senate.
The author has been
told by one of those in the know - government
officials, top investment bankers and CEOs, and
well placed journalists - that according to
trusted "highest government sources" in Germany
there have been close contacts between the court
and the German government - an astonishing fact
itself - that the Government has been assured by
the judges that the court will not stop the ESM
but is likely to insist on a reservation or two
and ask the federal president to attach a rider to
his signature under the ESM Treaty to the effect
that it is Germany's understanding that her
liability under the ESM will not be unlimited.
That rider will allow the Court to claim
it is no pushover, the government will say it
respects the Court's judgment and can express
itself to be satisfied as unlimited liability is
not on the cards, and the other eurozone countries
whose leaders are a touch less communautaire and a
bit more 'switched on' than Germany's will know
that when they will finally prove unable to pay
one by one, the German government will first
protest, do so again, then negotiate and finally
give up and accept unlimited liability.
For the federal president's reservation as
to the German government's subjective state of
mind is not worth the paper it is written on when
the Treaty says otherwise. How could it be any
different or offer Germany any assurance as the
German government cannot even prevent ECB
purchases of government bonds or bail-outs of the
weaker eurozone states when the Treaty clearly
prohibits both.
There is really no
substitute for insider knowledge - in the law, no
more than in finance. The author hopes that this
article will find at least some readers in China,
Southeast Asia and in the Islamic world so that
they may remember a thing or two about
'constitutional government' in the West when the
Western leader arrives on their shores to lecture
them about the 'benefactions' of the 'the rule of
law', the separation of powers and human rights in
the West.
Dr Gunnar Beck teaches
EU Law at SOAS, University of London, is a
practicing barrister and a former legal adviser to
the European Scrutiny Committee of the House of
Commons. He is the author of The Legal
Reasoning of the Court of Justice of the EU,
which will be published by HART Publishing,
Oxford, in October 2012.
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
