23 October 2011

German parliament slows euro rescue decisions

The government of German Chancellor, Angela Merkel, has given parliament a greater say in the euro bailout than it has actually been required to do, following a recent ruling by the country's highest court. Merkel took the step to quiet critics of the common currency rescue plan, but it could also limit the European Union's ability to act in this time of crisis.

The complication is the result of a ruling by Germany's constitutional court, which grants the Bundestag a substantial say in crisis measures. But the German government is also at fault. To convince euro sceptics in its own ranks to approve the bailout fund, it allowed the parliament to give itself far more influence than required by the judges on the constitutional court in the southwestern city of Karlsruhe. The budget committee is now authorised to participate, at an early juncture, in almost every measure taken by the bailout fund.

The first test of the new crisis procedure already proved to be problematic. In the past, the heads of state and government approved measures at EU summits that then had to be ratified in the national parliaments. But now, under the new German laws, Germany's representatives will have to follow the parliament's instructions. As a result, the chancellor will now have to enter the negotiations with her hands more or less tied.

The outcome became clear in last week's conflict between Germany and France over the configuration of the European Financial Stability Fund (EFSF). The governments of the two countries were sharply at odds over how to boost their financial strength, when members of the German parliament began getting involved.

Merkel considered cancelling the summit altogether, hoping it would spare her the humiliation of having to explain to her counterparts that she, as the head of the government, was unable to make any decisions. The consequence was unprecedented confusion. Council President Van Rompuy spent all day Thursday on the phone with Merkel and Sarkozy, trying to find a way out of the jam. Van Rompuy finally managed to convince Merkel and Sarkozy to meet with the heads of state and government on Sunday, after all. But the decision on the bailout fund will not be made until Wednesday, during a second meeting of the 17 eurozone governments, provided Germany and France can come to an agreement by then. This is not what good crisis management looks like, nor does it send a convincing signal to the markets.

Luxembourg Prime Minister Jean-Claude Juncker pins part of the blame for Europe's disastrous image on Germany. "The pace of organisation in Berlin is slower than in other capitals", Juncker complains. He certainly understands the budget law of the Bundestag, the head of the euro group says, "but this cannot result in the EU not being able to react as quickly as is necessary".

Leaders like Juncker seeking to rescue the euro already fear that such double summits could become the rule in the future, because of the Germans. "The Bundestag cannot decide on every little detail in advance, because negotiations sometimes continue until the very end of the summits", says Juncker. Others fear that parliaments elsewhere in the EU could emulate the Bundestag and make similar demands. "If such a difficult parliamentary process takes place in the 16 other euro countries, or even in the Triple-A (rating) countries", warns German EU Commissioner, Günther Oettinger, "Europe will no longer be sufficiently capable of taking action".

A solution to the problem is not in sight, either. Until now, it was often the case that Germany, France and other partners had different interests on important issues. Europe is built on compromises, which are often reached only at the last minute during summits. The EU could not have continued to develop under a different system.

In the past, the parliament only had the power to approve or reject the complex decisions made at these summits. Ironically, this principle appears to have been suspended when it comes to rescuing the euro. The Bundestag does not wish to simply delegate its most important instrument, the power of the purse. For this reason, it is right in demanding a say in important decisions. On the other hand, speed is particularly important in crisis situations, when there is sometimes no time for protracted democratic procedures. This is a problem for which there is no clean solution in the complicated structure of the EU, in which the European Parliament does not have the same rights as a national parliament.

The new German legal position leads to a paradoxical situation. Although the Bundestag has more rights with respect to the EFSF, its fundamental dilemma remains unchanged. In the past, governments negotiated compromises at their summit meetings, but now they'll have to do so ahead of time. For members of parliament, nothing has really changed. If they reject the deal, there will be no agreement within Europe, which would be a political disaster for the administration. There is now a new hurdle in Germany's European policy, but not necessarily more democracy.

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© Spiegel Online