Germany’s constitutional court will begin hearings today, with submissions from the plaintiffs and statements from Jens Weidmann and Jorg Asmussen;
  • final decision unlikely before September elections;
  • most observers expect a moderate ruling – perhaps some new red lines for the German governments – but not decision ruling OMT to be unconstitutional;
  • Holger Stelzner says this rules determines whether the central bank is allowed to monetise debt;

11.06.2013

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Europe’ s supreme authority is holding an audience today

This is the Karl Marx moment of the eurozone crisis with history is repeating itself as a farce. It is another of those constitutional court moments, with public hearings today and tomorrow. For added drama, it pitches the two German representatives in the ECB’s governing council at opposite ends. A shootout is expected.

The anti-climax is guaranteed. It is clear already that the court will not strike down the OMT. What is less clear is what else the court might say, what conditions it might attach. Already, in the run-up to those hearing, the ECB itself created some confusion as to whether the OMT was open-ended. Its lawyer said it was capped. The ECB then corrected its lawyer, saying it was not capped, while Mario Draghi emphasised that it was conditional. We would have thought that they could have stuck to the line “conditional but not capped” – which should have been easy enough to remember. We might get further such “clarifications” during those hearings today and tomorrow.

For Frankfurter Allgemeine this is appears to be the most important event in all of economic history. The hearings relate to the OMT, as part of a wider case against the EMS, brought by various eurosceptic MPs and professors, plus a further 37,000 citizens, who have joined a class action suit. FAZ writes that today’s hearing is unusual because the court only rarely operates publically. It said the court’s president, Andreas Voßkuhle, will emphasise the government’s autonomy in matters of economic policy, and the court’s self-restraint. This will be followed by the statement from various plaintiffs, following by statements from Jens Weidmann and Jorg Asmussen, who apparently agreed to refrain from personal attacks. This is followed by statement from various, mostly Eurosceptic, German economics professors. Wolfgang Schauble is also there.

There will be no verdict before the elections.  No one really expects a radical decision, but Frankfurter Allgemeine says the justices may impose red lines on the German government to force it to subject any vote in the ESM to certain criteria. It may also pass the buck to the ECJ – but that would be unusual, since the German courtiers do not easily tolerate courtiers above them. [WM1] 

In a front page editorial, the paper’s economics editor and arch-eurosceptic Holger Stelzner, calls it one of the most important court cases in history. The issue is whether Draghi is allowed to buy unlimited amounts of national debt, he writes, and whether this constitutes debt monetisation.  He says that passing the buck to the ECJ would invariably give Draghi a green light for his OMT. He recalls the case of the Dublin supreme court that passed a decision on the ESM to the ECJ, which waved it through without blinking, thus turning the no-bailout rule into a bailout rule. His own view is that the ECB is overreaching its mandate. It is not its principal job to guarantee the survival of the eurozone.

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