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ESM? Ja, aber...

Publishing date
12 September 2012

The German constitutional court has, as was widely expected, given a "yes-but" answer to the ESM treaty. The "but" refers to Article 8(5), sentence 1 "The liability of each ESM Member shall be limited, in all circumstances, to its portion of the authorised capital stock at its issue price." The crucial point here is the reference to the "issue price". A number of German critics previously argued that the German liability was not limited to €190 billion as explicitly stated in Article 8(1), but could be higher if the issue price of the authorised capital stock is increased.

A second "but" refers to Articles 32 (5), 34 and 35 (1). Here, the court demands that the two chambers of the German parliament (Bundestag und Bundesrat) need to be fully informed. According to the reading of the court, the three articles could be read in a way that requirement to fully inform the parliament is restricted. And indeed, Article 34 grants professional secrecy to the ESM governors, i.e. the ministers, and directors. This would essentially remove their obligation to fully inform their national parliaments, and in some circumstances might even limit their scope to inform parliament.

The Karlsruhe judges say that these two objections must be removed in a "völkerrechtlich bindend" way, meaning in a way that is binding in international law. My first reaction would be that this probably cannot be done by just agreeing in the German implementing law that the conditions are met. It may require changes to the ESM treaty, or a new treaty alongside the ESM. I suspect that this will significantly delay the implementation of the ESM.

About the authors

  • Guntram B. Wolff

    Guntram Wolff was the Director of Bruegel. Over his career, he has contributed to research on European political economy and governance, fiscal, monetary and financial policy, climate change and geoeconomics. Under his leadership, Bruegel has been regularly ranked among the top global think tanks and has grown in influence and impact with a team of now almost 40 recognized scholars and around 65 total staff. Bruegel is also recognized for its outstanding transparency.

    A recognized thought leader and academic, he regularly testifies at the European Finance Ministers' ECOFIN meeting, the European Parliament, the German Parliament (Bundestag) and the French Parliament (Assemblée Nationale). From 2012-16, he was a member of the French prime minister's Conseil d'Analyse Economique. In 2018, then IMF managing director Christine Lagarde appointed him to the external advisory group on surveillance to review the Fund’s priorities. In 2021, he was appointed to the G20 high level independent panel on pandemic prevention, preparedness and response. He is also a professor (part-time) at the Solvay Brussels School of Université Libre de Bruxelles, where he teaches economics of European integration.

    He joined Bruegel from the European Commission, where he worked on the macroeconomics of the euro area and the reform of euro area governance. Prior to joining the Commission, he was coordinating the research team on fiscal policy at Deutsche Bundesbank. He also worked as an external adviser to the International Monetary Fund.

    He holds a PhD in economics from the University of Bonn and studied in Bonn, Toulouse, Pittsburgh and Passau. He taught economics at the University of Pittsburgh and at Université libre de Bruxelles. He has published numerous papers in leading academic journals. His columns and policy work are published and cited in leading international media and policy outlets. Guntram is fluent in German, English, French and has good notions of Bulgarian and Spanish.

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