It’s no secret that the Germans have had their differences with the European Central Bank which, while it has not been as profligate as certain members of the Eurozone and was certainly useful in bringing Greece to heel, was also perhaps a bit looser with the purse strings under a citizen of one of those members than it would have been under a properly tightfisted Teuton. This lingering frustration with the spending of German euros on things Germans do not want is certainly felt by the members of Germany’s Constitutional Court, which chose this week to express those feelings by essentially declaring the ECB unconstitutional under Germany’s Basic Law.
This was, perhaps, cathartic. But it is also probably baseless and rather puts in danger another thing near and dear to the German heart, it’s successful third attempt at a conquest of Europe over the last 70 years, such that even Wolfgang Schäuble, who has never failed to be excited by an austerity measure, thinks the court may have gone a bit far.
“The court is asking the central bank to show that it took into its decision the proportionality principal,” Lorenzo Bini Smaghi, chairman of Societe Generale and a former member of the ECB’s executive board, told CNBC’s “Squawk Box Europe” Friday.
“Frankly, to think that the ECB did not do that is laughable — there is plenty of research, of reports, of statements, that clearly show the ECB doesn’t just meet in five seconds and say ‘let’s just raise rates or cut rates’ out of the blue. There is a very deep analysis, discussions, arguments, and sometimes disagreements.”
“It’s very possible that the existence of the euro is now put into question in other European Union member states, because every national constitutional court can decide for itself,” Schaeuble, who now presides over Germany’s lower house of parliament, told Redaktionsnetzwerk Deutschland. “This situation makes nobody happy….” Schaeuble acknowledged that as finance minister he was also dissatisfied with some of the ECB’s decisions, saying independent institutions without democratic legitimacy must stick strictly to their mandates. That means it’s “not easy to refute” the German decision.
Well, as it happens, the European Court of Justice didn’t have much trouble refuting it at all.
In an unprecedented counterattack on Friday, the EU Court of Justice said its entire purpose is to make sure EU law is properly applied across the 27-nation bloc. It said it “alone” has the “jurisdiction to rule that an act of an EU institution is contrary to EU law….”
In the decision -- dubbed “a declaration of war” by a law professor -- the German judges lashed out at their EU counterparts, saying they’d overstepped their powers when they backed the ECB’s policy in a previous ruling.
In Friday’s statement, the EU court warned that such “divergences between courts of the member states” would be “liable to place in jeopardy the unity of the EU legal order and to detract from legal certainty.”
And, as a reminder, the last German declarations of war did not go well.