When the history books come to be written about the euro, September 12, 2012 could well prove one of the most significant dates in the life of the embattled single currency.
At 10:00 am (0800 GMT) on that day, the eight scarlet-robed judges of Germany’s Verfassungsgericht or Constitutional Court will file into the courtroom in the southwest city of Karlsruhe to decide whether German President Joachim Gauck can sign into law the eurozone’s key crisis-fighting tools.
German parliament already voted in favour of the European Stability Mechanism (ESM) and the European fiscal pact with a two-thirds majority at the end of June. But Gauck held off from completing the ratification process in face of a number of legal challenges filed by the far-left Die Linke party, a citizens’ initiative group called “more democracy” and a well-known eurosceptic from Chancellor Angela Merkel’s CSU Bavarian sister party, Peter Gauweiler.
They argued that the ESM — the EU’s permanent 500-billion-euro ($627-billion) rescue fund — and the fiscal pact were incompatible with Germany’s “Grundgesetz” or Basic Law because they are effectively forcing Germany to surrender its budgetary sovereignty without the necessary democratic backing.
By committing Europe’s biggest economy — and already its effective paymaster — to the ESM, parliament was essentially exposing Germany’s public finances to unlimited risks should one eurozone country after another topple under the debt crisis, they argued.
And that meant German voters’ basic democratic rights were being infringed upon. In addition, the critics argued the ESM breaches the “no bailout clause” of the EU’s Maastricht Treaty, under which Germany agreed to relinquish its revered Deutschmark on condition there would be no direct or indirect sharing of eurozone members’ debt.
The ESM, which will replace the temporary European Financial Stability Facility, should have been up and running by July 1. But it needs Germany’s share of the rescue money to function and has thus been held up pending the Constitutional Court’s ruling.
On September 12 the court will not yet rule on the constitutionality of either the ESM or the fiscal pact.
It will simply decide whether to grant temporary injunctions sought by the plaintiffs that will prevent President Gauck from signing the legislation into law until a final ruling can be made next year.
If the court dismisses the plaintiffs’ case, everything will be hunky dory: Gauck can sign the legislation and the ESM can at long last become operational, much to the relief of the financial markets.
