Germany’s constitutional court: Pro austerity, contra solidarity

Back in June, Germany’s parliament, the Bundestag, voted on the ratification of European Stability Mechanism (ESM) a.k.a. “bailout fund” and European Fiscal Compact a.k.a. “fiscal pact”. (the two are tied up together)

The former is intended to loan money to eurozone countries who have trouble financing their public spending by public debt utterance, for instance because the yields they have to offer have become too high. The fund is supposed to be capitalized by the eurozone countries, mainly Germany, France, Italy, and Spain. A simpler way would of course be if the ECB unconditionally backed eurozone public debt but this goes against the neo-liberal article of faith that the central bank should be independent. Therefore, that solution was not considered.

The fiscal pact, on the other hand, takes budget autonomy away from eurozone member states. It tightens the nonsensical 3% deficit, 60% public debt rate requirements even further, requires countries to pass laws that install those same requirements at a national level, places compliance with its budgetary and other requirements under the jurisdiction of the European Court of Justice, and allows any ratifying state to bring enforcement proceedings against any other ratifying state. In short, it reduces eurozone members’ sovereignty, and in times of economic recession, like currently, requires cutting public spending, i.e. slashing the social safety net.

The bailout fund is a solution to a problem that can be solved more directly, the fiscal pact leads a further erosion of democracy in the eurozone. The conservative party voted mainly in favor because the fiscal pact makes for great electioneering, the liberals voted in favor because they are neo-liberal to the core, the greens voted in favor because they are neo-liberals on bicycles, and the social democrats voted in favor because they think that being like the conservatives will help them win elections.

At that point, the only way of stopping the ratification seemed to be a court case in front of Germany’s constitutional court and several parties (not political ones, except for the Left) chose this option. The main focus of the most of the plaintiffs was that they didn’t want German “tax payers’ money” to go to “profligate” countries like Greece and Spain.
As someone who is in favor of democratic decision making, I hoped that the fiscal pact would be found unconstitutional since it takes budget sovereignty away from the German government (or any eurozone government, for that matter). The bitter pill to swallow would have been that eurozone countries in recession would not have been supported but maybe this could have pushed the ECB into action.

Well, today the courts decision came in. Their priorities are clear: there’s apparently nothing wrong with giving up budget sovereignty…but the amount of money that will be used to try and help eurozone members in recession – that will have to be capped:

The court ordered that ratification can only be completed if it is ensured under international law that Germany’s current maximum liability of €190 billion ($245 billion) can only be increased with the approval of the German representative in the ESM board…

So “debt brakes”, with all they entail, lowered education spending, sparser social safety net, more expensive health care, reduced unemployment support, will appear in all the eurozone countries, lowering their citizens’ standard of living. And to add insult to injury, the transfer payments within the EU that could make this a bit less harsh for those already in dire straits will be restricted.

What does one do in a country where no big party offers a different position, the press parrots the party line, and the judiciary doesn’t check the other branches of government? Come to think of it, how does one call such a political system? Because this is not a functioning democracy anymore.

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This entry was posted in austerity, debt, developed countries, economic policy, eurocrisis, neo-liberalism, public debt, standards of living, wealth distribution. Bookmark the permalink.

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