12 September 2012

Germany's Constitutional Court approves German legislation on the ESM Treaty and Fiscal Compact

On 12 September, the Federal Constitutional Court pronounced its judgement on several applications for the issue of temporary injunctions, dealing in particular with the constitutionality of the German laws giving consent to the ESM and the Fiscal Compact. (Includes link to ESM Financing Act.)

The judgement has paved the way for Germany to ratify the Treaty establishing the European Stability Mechanism (ESM Treaty) and the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (also known as the Fiscal Compact).

The Federal Constitutional Court stated in its judgement that the ESM Treaty may be ratified provided that it is ensured, under international law:

1. that under Article 8 (5), first sentence, of the ESM Treaty the amount of all payment obligations arising for the Federal Republic of Germany from the Treaty is limited to its portion of the authorised capital stock of the ESM (€190,024,800,000), and that no provision of the Treaty may be interpreted in a way that establishes higher payment obligations for the Federal Republic of Germany without the agreement of the German representative on the ESM boards; and
2. that the regulations of the ESM Treaty concerning the inviolability of ESM documents (Articles 32 (5) and 35 (1) of the ESM Treaty) and the obligation of professional secrecy for all persons who work for the ESM (Article 34 of the ESM Treaty) do not stand in the way of providing comprehensive information to the Bundestag and the Bundesrat.

To fulfil these requirements, the German government is expected to enter a reservation when it deposits the instrument of ratification.

Press release

Judgement

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Act on Financial Participation in the European Stability Mechanism (ESM Financing Act)

The Bundestag has adopted the ESM Financing Act in seven sections:

Section 1: Assumption of German share in the capital stock of the European Stability Mechanism; changes to consolidated lending volume of the European Stability Mechanism and the European Financial Stability Facility

(1) In order to meet its obligations from joining the European Stability Mechanism (ESM), the Federal Republic of Germany shall contribute €21.71712 billion to the total paid-in capital of the European Stability Mechanism amounting to €80 billion, and €168.30768 billion to the total callable capital of the European Stability Mechanism amounting to €620 billion.

(2) The Federal Ministry of Finance shall be authorised to assume guarantees for the callable capital totalling €168.30768 billion. Payments to callable capital shall be provided within the federal budget.

(3) The Federal Government shall be authorised, through its representative on the Board of Governors, to approve a decision pursuant to Article 10 paragraph 1 of the Treaty Establishing the European Stability Mechanism to change the consolidated lending volume of the European Stability Mechanism and the European Financial Stability Facility within the meaning of Article 39 of the Treaty Establishing the European Stability Mechanism to the extent that funds required for the implementation of emergency measures approved by the European Financial Stability Facility until 30 March 2012 will not be deducted, up to an amount of €200 billion, for the calculation of consolidated lending volume within the meaning of Article 39 of the Treaty Establishing the European Stability Mechanism.

Section 2: Granting of stability support by the European Stability Mechanism

Section 3: Budgetary responsibility and responsibility for stability

Section 4: Parliament’s right of prior approval for decisions in the European Stability Mechanism

Section 5: Participation of the Budget Committee of the German Bundestag

Section 6: Participation of Special Panel

Section 7: Provision of information by the Federal Government

Full ESM-Financing Act

© Bundesregierung