The Bundestag — the lower house in Germany’s bicameral legislature — and the country’s constitutional court will rule on the legality of the 440 billion-euro European Financial Stability Fund (EFSF) late next month, deciding if it breaches Treaty law or undermines German fiscal sovereignty. German Chancellor Angela Merkel, who supports the plan, no longer has enough coalition votes in the Bundestag to ensure its backing. If the court rules against the rescue fund, it could set off hysteria resulting in a new European debt crisis.
Recent reports show that 23 Bundestag members from Merkel’s coalition plan to vote against the package, which means the Chancellor will have to rely on opposition votes if the measure is to pass. Last week, German president Christian Wulff accused the European Central Bank of going “far beyond its mandate” in purchasing large amounts of Spanish and Italian debt, and said that attempts at European fiscal unity strike at the “very core” of democracy.
Wulff’s comments came only a day after the Bundesbank issued a similar statement condemning the ECB’s bond purchases and warning that the EU was nearing a debt union without “democratic legitimacy” or treaty backing. Joahannes Singhammer, leader of Bavaria’s Social Christians (CSUs), which has 44 members in the Bundestag, has signaled his own contempt for the ECB’s actions, which he says “dangerously” jumped the gun before parliaments had voted.
A CSU document to be released Monday says the accord reached between Merkel and French president Nicolas Sarkozy, which plans for an “economic government for eurozone states”, is unacceptable. The document demands treaty changes to let the EMU states go bankrupt, and allow the government to eject states from the euro altogether for serial abuses. “An unlimited transfer union and pooling of debts for any length of time would imply a shared financial government and decisively change the character of a European confederation of states,” said an earlier draft of the document, obtained by German news magazine Der Spiegel.
The new package would allow the EFSF to buy bonds pre-emptively and recapitalize banks. Most City banks say the fund will need 2 trillion euros in order to stop the crisis from engulfing Spain and Italy. While the bill is still likely to pass, Merkel faces opposition on every front, including from many members of her own Christian Democrat (CDU) party, signaling that Germany is likely to resist any and all future moves to boost the EFSF’s power.