Don’t celebrate too early, Germany’s Constitutional Court has given a stinging judgment on European integration

 

Germany’s Constitutional Court has spoken, and it is quite a bombshell. You would not have noticed if you had read non-German newspapers, or only listened to Commission president Barroso, who within minutes of the judgement declared victory for the Lisbon Treaty – obviously not having read the 147 page judgement, or probably not even the 10 page summary, as Der Spiegel pointed out, commenting on the “hasty statements of jubilation” from Brussels. The incoming Swedish presidency reaffirmed the ratification timetable, and it seemed that everybody was relieved that the Court did not make a decision that could have delayed Germany’s ratification beyond this year.

The Constitutional Court found the Treaty to be in line with the German constitution, but not a German bylaw, which governs the rights of the two chambers of the German parliament. This will have to be redrafted in the summer. The Court has ruled the Bundestag and the Bundesrat need to have a full vote before the government agrees to extension of powers of the EU, for example a shift from unanimity to qualified majority voting. Furthermore, and this is probably the most sensational aspect of the ruling, the Court ruled explicitly on the question of the finality of European integration, by stating that ultimate sovereignty must rest with the member states. German newspapers and various constitutional experts quickly interpreted this statement as marking the finality of European integration. In addition, the Court did not only strengthen parliament but also itself, by insisting that it will continue to oversee cases that touch on democratic rights of German citizens. Frankfurter Allgemeine said in a comment that the Court had already granted itself the right in his judgement on the Maastricht Treaty, but the present judgement goes much further. It will not be limited to a few isolated cases, but there are already a number of issues where European law and German constitutional law seem to conflict.

(We have not read the 147 pages either, only the summary, but we feel that this judgement deserves further and detailed analysis. We would also caution against thinking that the verdict has no implication for the Lisbon ratification process. Of course, Germany will ratify, but as one of Germany’s constitutional experts predicted yesterday, the judgement will be studied very closely by those who have not yet ratified the Treaty, including the Czech president, who may be inspired to find additional procedural reasons for a delay.)

 

Verhofstadt liberal leader in EP

Guy Verhofstadt, former Belgian prime minister, was elected president of the liberal ALDE group  in the European parliament, reports Le Soir. None of the two large parties have a majority in the EP, which gives the liberals a pivotal role. Verhofstadt has been canvassed as a possible alternative to José Manuel Barroso as European Commission president until Barroso's endorsement by all 27 member states at the recent EU summit.  European Voice writes that he may still be in line for one of the other senior EU posts that will become available if and when the Lisbon treaty comes into force next year.

 

 

In search for a council president

FT Deutschland has an article on the possible future line-up of top posts in the EU, as Tony Blair seems to be a frontrunner for the Council presidency, possibly also Filipe Gonzales, the articles says. The article also had a long list of names for the office of EU foreign minister, with names like Bildt, Kouchner, Steinmeier and also Solana.

 

 

What happens to national investment projects?

Le Monde looks at what happens to large investment projects, such as TGV fast train connections throughout France, once they get off the drawing board. Six months after the announcement, the TGV projects are stuck. About ten local governments, mistrusting financial engagements from the state, used their position to attach conditions to their participation. Local governments are concerned about the abolition of the local business tax, their main income resource, and effective in 2010, and are ready to stand up against the state. [If this is an omen for the latest of Sarkozy’s national investment projects, it’s a bad one. Everybody is defending his own stake rather than uniting behind the big national effort, as Sarkozy and his entourage like to advertise it. ]

 

Vittori on economists and diner parties

Jean Marc Vittori in Les Echos writes that economists have a hard time on diner parties today, forced to defend themselves and their failure to predict and explain the crisis.  Vittori argues that their failure is due to the fact that many economists abandoned  economic reasoning and  are instead hyperspecialised, supported by rising computation capacity for vast data bases. But the search for causes of this crisis will require that the economists take once again a big angle rather than focussing on aspects of it. Otherwise we will be stuck with studies proving that one asset was more toxic than another.

 

 

Spanish house prices fall and fall…

The latest official data on Spanish house prices show a 10% year-on-year fall in prices, which is still relatively moderate, compared to the sharper price declines in the US and the UK, El Pais notes, but the article quotes experts as saying that there is no reason to expect that the decline in Spain should be any more contained than in the US, where prices have fallen by more than 30%. El Pais says Madrid and Catalonia are among the regions with the steepest decline, but this should soon spill over into the rest of the country.

 

… and so do US prices

The Case-Shiller house price index fell by 0.6% on a non-seasonally adjusted basis in April – and by 0.9% on a seasonally adjusted basis – which suggests that the second derivative of house prices is improving. This means prices are still falling, but at a slower speed. Calculated Risk has everything you need to know about this, including a reference to a statement by Prof. Shiller, who says that the situation may be slowing improving, and a good discussion about the tail-end of a housing bust, which consists of a long series of small price declines. The overall conclusion is that the decline in US house prices still has further to go.

 

…but not UK prices

The UK has seen three month of house price increases over the last four months, which has led some commentators to declare, probably prematurely, that the crisis is over. Edward Harrison has a discussion of UK house prices in RGE Europe Economonitor, where he quotes an analyst who says that this may be mostly an inventory situation, due to abnormally low supply levels, which won’t last forever, and which might presage another round of price decreases.

 

 

A disturbing pattern

Wolfgang Munchau, writing in FT Deutschland, finds a common pattern in Germany’s attitude to debt. The government is heading for a zero level of debt, on the assumption that the economy will not be growing much in the future. And on a micro level, prospective students do not want to take on debt either on the grounds that future expected earnings will be insufficient to repay the loan. The country’s debt aversion is based on a premise  of no future. The debt aversion itself, however, contributes to that outlook significantly, as Germany’s, in terms of economic policy, is now embracing the ideal of Ceausescu’s Rumania.

 

Yellen on inflation

The Wall Street Journal has a good discussion of Janet Yellen’s recent comments on inflation. She said the Fed would find it relatively easy to unwind its positions, but then goes on that the real risk is a long period of stagnant growth. She says the weak economy is, if anything, putting downward pressure on wages and prices, and consumers will continue to retrench as they repair their household balance sheets.  

---