Should another euro state need financial help, then the European Union must intervene quickly. Appropriate mechanisms for such a situation are already in place: the current European Financial Stability Facility (EFSF) and the permanent European Stability Mechanism (ESM), which is to become operational mid-July. Both are equipped with money and backed by member states, while representatives of the German federal government sit on their decision-making bodies.

But in Germany, it's not the government that's responsible for public finances; it's the Bundestag, the German parliament. That's why German stability mechanism law requires the government to ask parliament for approval before any EFSF decision that “affects the budgetary responsibility of the German parliament.” The law states that in the case "of special haste and confidentiality,” a special panel consisting of nine members from the Budget Committee should decide on any such applications filed by the government.

Constitutional court nixes first panel

The German parliament elected members of the first special panel on October 26, 2011. But the very next day, the German Constitutional Court in Karlsruhe rejected the panel, in an accelerated decision. Members of parliament from various parties had called on the highest court to address the issue, claiming curtailment of rights. The judges in Karlsruhe agreed, ruling that the decisions on the special panel went against German law. “Budget law and policies of the German parliament,” ruled the Constitutional Court, “are always decided on in the plenary sessions, via negotiations and regular decision-making processes.” In other words: the entire parliament has to be consulted on budgetary matters.

Strictly limited powers

Only on one single topic would the judges in Karlsruhe allow the special panel to decide without the parliament: if the euro rescue fund wants to buy government bonds on secondary markets - bonds that aren't freshly issued, but rather are already available. Finance Minister Wolfgang Schäuble and conservative parliamentarian Peter Altmaier had “laid down understandable reasons in our oral negotiations as to why the publication of plans to take on such an emergency measure would be enough to foil its success.”

On April 27, German Parliament passed a revised version of the Stability Mechanism Law, which took into account the above-mentioned and other objections issued by the Constitutional Court. According to the new wording, the special panel can only decide without parliament if “the acquisition of government bonds on the secondary market is planned” and if the German government has asserted “special confidentiality in the matter.”

Special panel has to ‘mirror' parliament

The new version of the law also revises the regulations that bound the special panel's composition. The Constitutional Court ruled that the law fell short of complying with a "basic mirroring rule," which states that a parliamentary panel has to "mirror the composition of the plenary in terms of number of individual party members," as a 2004 judgment read.

In the special panel that was stopped by Karlsruhe this year, Conservative parties CDU and CSU had three seats (relative to their 237 in parliament); the SPD had two seats (146 in parliament); and government coalition partner FDP had two seats (93 in parliament). The Left Party and the Greens both had one representative; in parliament they have 76 and 68 seats, respectively. The Constitutional Court pointed out in its ruling that “if the calculation proceedings were applied the regular way,” the CDU/CSU would have to have one more seat, and the FDP one less.

And so, the second composition of the special panel will likely appear as follows: four seats for the CDU/CSU; two for the SPD; while the FDP, the Left and the Greens would each have one seat. In addition, all members will have substitutes - something missing in the first constellation, and which the court in Karlsruhe also criticized.

But in any case, there will be hardly any work for the nine-member panel under the new regulations. Instead, all members of parliament now have to be ready for the moment when a special session is convened, to make quick decisions around topics involving the EFSF or ESM.

Author: Peter Stützle / nh
Editor: Sonya Diehn