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German Constitutional Court gives temporary approval to ESM and fiscal treaty with some added conditionality; Court to review whether OMT programme transfers too much German sovereignty to the EU

12 Sep 2012

In its long-awaited ruling on the constitutionality of the ESM and the fiscal treaty, the German Constitutional Court this morning ruled that the ratification of both could proceed on the condition that Germany’s liability under the ESM cannot exceed the present €190bn cap without the approval of the Bundestag, in addition to other conditions – such as keeping both houses of the German Parliament fully informed, while possibly requiring Bundestag approval for all ESM activations. The court also ruled out the ESM borrowing money from the ECB.  The decision is only temporary, with a full ruling due early next year – although no substantial changes to today’s decision with respect to the ESM are expected. Significantly, however, the Court indicated that, as part of its full ruling, it will determine whether the ECB’s new OMT bond-buying programme will transfer additional German sovereignty to the European level above and beyond that which the country has committed itself to in the EU Treaties.

The ruling was broadly welcomed by German media and politicians, with Foreign Minister Guido Westerwelle praising “the [Court’s] wise decision in the pro-European spirit of our Constitution.” SPD’s parliamentary leader Frank-Walter Steinmeier welcomed the additional participation rights for the Bundestag. However, CDU MP Wolfgang Bosbach, who has been critical of euro bailouts, said that he had “mixed feelings” about the verdict, warning that the German liability cap was only “superficially comforting” given the possibility of the ECB increasing it via bond-buying.
Welt FT Spiegel Süddeutsche EUobserver

Barroso restates his desire for new EU Treaty to create “federation of nation states”;
Commission to put forward “explicit ideas” for Treaty change before June 2014
“A deep and genuine economic and monetary union can be started under the current treaties, but can only be completed with a new treaty,” European Commission President José Manuel Barroso said today in his ‘state of the Union’ speech to the European Parliament. He said the European Commission would bring forward “explicit ideas” for Treaty change before the June 2014 European Parliament elections. “Let's not be afraid of the words: We will need to move towards a federation of nation states. This is our political horizon. This is what must guide our work in the years to come,” he said.
Reuters El País Il Sole 24 Ore

Germany, UK likely to fight European Commission’s banking union proposal
The European Commission has today unveiled its proposals which would task the ECB with supervising all the 6,000 banks in the eurozone from 1 January 2014. As reported by several papers today, and noted on Open Europe’s blog on Monday, the voting system within the pan-EU banking watchdog, the EBA, would also be changed – making it more difficult for the UK and other member states to overturn EBA decisions on breaches of EU law and dispute settlement. The UK, Germany and other member states are likely to push for changes to the Commission’s proposal, in order to give national supervisors more control over decisions. 

Open Europe’s Director Mats Persson is quoted by the Telegraph saying, “If the UK manages to write the rulebook, the City could benefit from this. But it could easily go the other way, with the net effect of the new arrangement being that it actually becomes harder for the UK to block rules designed around the eurozone, which it may disagree with. The government needs to push for stronger safeguards.” Open Europe’s blog post discussing the implications of the proposal for the UK and other non-euro countries is quoted by Die Welt.
Open Europe blog Open Europe blog 2 EC press release IHT FT CityAM WSJ El País EUobserver Telegraph Euractiv Welt

In an article looking at the new UK export figures published yesterday, City AM quotes Open Europe noting that the proportion of UK goods exports going to the eurozone fell to 43.6% in July – the lowest share since records began in 1988. Only 48.6% of UK goods exports now go to the EU as a whole.
Open Europe research Open Europe blog CityAM CityAM: Heath

Liberals and Social-Democrats neck-and-neck ahead of today’s Dutch elections
According to the last opinion poll published ahead of today’s Dutch elections, Prime Minister Mark Rutte’s liberal VVD party would gain 35 seats out of 150 in the lower house of the Dutch parliament, only one more than the social-democratic PvdA party. The radical and EU-critical Socialists and Geert Wilders’ PVV are vying for third place. Open Europe’s Pieter Cleppe argues on Public Service Europe, “The worsening Dutch economy will only serve to make it harder and harder to convince citizens of the need for eurozone bailouts, regardless of who is in charge.” Open Europe’s briefing discussing the possible outcomes of the elections is cited by Bloomberg.
Open Europe research
Bloomberg BN Telegraaf Public Service Europe: Cleppe Telegraph Open Europe research IHT FT WSJ Telegraph Irish Times Euractiv BBC

Huge Catalan independence rally in Barcelona
According to Catalonia’s local police, up to 1.5 million people took part in the pro-independence march that brought Barcelona to a standstill yesterday. However, according to the national police, the number of participants was around 600,000, reports El Mundo. Catalan Governor Artur Mas said this morning, “Catalonia has never been so close to its wishes and aspirations [for independence].” Separately, Spanish opposition socialist leader Alfredo Pérez Rubalcaba said this morning that, if Spain were to make a request for EFSF/ECB bond-buying, the conditions attached to it should be put to a vote in the Spanish parliament.
Open Europe research Guardian El País FT El País 2 El Mundo Expansión Expansión 2 El Economista

European Voice notes that the European Commission is to withdraw a controversial legislative proposal on the right to strike after more than a third of the EU’s national parliaments said that they were opposed to the plan because it breached the subsidiarity principle. It is the first time the ‘yellow card' process introduced under the Lisbon Treaty has been invoked.
Open Europe research European Voice

Following its fifth monitoring mission to Lisbon, the EU-IMF-ECB Troika has decided to relax Portugal’s deficit targets for this and next year, raising them to 5% and 4.5% of GDP from 4.5% and 3% respectively, Jornal de Negócios reports.
Open Europe blog Jornal de Negócios FT WSJ

Bloomberg reports that Greece’s Hellenic Republic Asset Development Fund has identified 40 uninhabited islands and islets that could be leased for as long as 50 years to cut the country’s debt.
Kathimerini Kathimerini 2 Les Echos

Talking about the appointment of the next European Commission President in 2014, EU Justice Commissioner Viviane Reding said Polish Prime Minister Donald Tusk “would be a great choice, if we cannot persuade José Manuel Barroso to be a candidate one more time.”

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