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That was a German court and could be a problem for Germany.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Sep 11th, 2011 at 09:08:05 PM EST
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I do live in Germany, and know which Court it was.

"Life shrinks or expands in proportion to one's courage." - Anaïs Nin

by Crazy Horse on Mon Sep 12th, 2011 at 06:39:02 AM EST
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Your knowledge of the situation was never in question. The question was how and why a decision by a German constitutional court could be binding on the ECB and all other member states. The answer appears to be - "it's complicated."

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Sep 12th, 2011 at 11:40:31 AM EST
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We (along with everyone else) may have fallen for the punditocracy's tendentious reading of the court's ruling. However, if their interpretations are correct, no new institutions can be created which don't require the Bundestag to get involved in approving every action. This includes Eurobonds.

Economics is politics by other means

by Carrie (migeru at eurotrib dot com) on Mon Sep 12th, 2011 at 02:06:30 AM EST
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Just today: After Stark (Eurointelligence)

Wolfgang Münchau says Constitutional Court a disaster for the eurozone
In his column in the Financial Times, Wolfgang Munchau says there are only two solutions to the eurozone crisis - a debt monetisation, or a Eurobond. The first is illegal under European law, the second is now illegal under German constitutional law. The Constitutional Court's decision delineates what is legal and what is not. A temporary mechanism in which the Bundestag retains ultimate control, such as the EFSF, is legal. The permanent mechanism is clearly a borderline case, according to the judgement, as a result of which the ESM is likely to give rise to another, and possibly more serious challenge. A eurobond is clearly beyond what the constitution permits, because it involves a permanent transfer of fiscal sovereignty.

Economics is politics by other means

by Carrie (migeru at eurotrib dot com) on Mon Sep 12th, 2011 at 02:38:25 AM EST
[ Parent ]

Re: Eurobond Vorbei? (4.00 / 4)

So Germany has to change its constitution?

Well, I have heard that changing constitutions in order to deal with the euro crisis is popular in German leadership so that should not be a problem right?

</snark>

But seriously, how fast could Germany change its constitution to allow permanent transfer of fiscal sovereignty?

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Mon Sep 12th, 2011 at 04:32:30 AM EST
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Re: Eurobond Vorbei? (4.00 / 6)

If they could somehow hire Zapatero, it should be pretty quick....

by gk (gk (gk quattro due due sette @gmail.com)) on Mon Sep 12th, 2011 at 04:34:13 AM EST
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Re: Eurobond Vorbei? (4.00 / 4)

There is not much popular support in Germany for the eurobonds. If they'd also need to change the holy Grundgesetz (think US Constitution), the political and popular will should be about zero. In my opinion, the German Constitutional court just killed the Eurobond.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Mon Sep 12th, 2011 at 04:48:27 AM EST
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In 2009 they introduced a debt brake in the Grundgesetz, making it more holy.

Economics is politics by other means

by Carrie (migeru at eurotrib dot com) on Mon Sep 12th, 2011 at 05:03:48 AM EST
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And even less sinfull... :P

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Mon Sep 12th, 2011 at 05:13:12 AM EST
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Less sinnvoll I would say...

Economics is politics by other means

by Carrie (migeru at eurotrib dot com) on Mon Sep 12th, 2011 at 05:25:20 AM EST
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Could you please cite regarding popular support?

Both opposition parties support Eurobonds (SPD and Greens), as well as a majority of the CDU/CSU. Do you think the parties would take that position if there weren't some popular support? (this doesn't mean there is no opposition to Eurobonds, of course.)

"Life shrinks or expands in proportion to one's courage." - Anaïs Nin

by Crazy Horse on Mon Sep 12th, 2011 at 06:37:34 AM EST
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That is hopeful news from me. I was not aware of the particular opinions of the parties in the Bundestag, but were rather going on the noises coming from Merkel et consortes, which have repeatedly been negative on the issue of eurobonds.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Mon Sep 12th, 2011 at 06:43:22 AM EST
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Re: Eurobond Vorbei? (4.00 / 3)

See my original comment, which directly stated the support.

And please remember that many of the media commenters are flagging their own issues, or are representing bondholders.

"Life shrinks or expands in proportion to one's courage." - Anaïs Nin

by Crazy Horse on Mon Sep 12th, 2011 at 07:16:53 AM EST
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Can you give a link, or copy Münchau in full? and your first comment (to mine) link doesn't work.

"Life shrinks or expands in proportion to one's courage." - Anaïs Nin

by Crazy Horse on Mon Sep 12th, 2011 at 06:40:53 AM EST
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It appears googling can no longer bypass Eurointelligence's firewall...

Economics is politics by other means

by Carrie (migeru at eurotrib dot com) on Mon Sep 12th, 2011 at 06:47:27 AM EST
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FT.com: Stop rejoicing. This was no victory for the eurozone (Wolfgang Münchau, September 11, 2011)

As an advocate of eurozone bonds, I have to admit their prospect looks grim after last week's ruling of the German constitutional court. The court upheld the European financial adjustment facility, the crisis mechanism. This was, undoutedly, good news. But after I read the whole ruling, which ran to 29 tightly written pages, I realised that this judgement was not a victory for the eurozone at all. On the contrary, it categorically rules out any policy option beyond what has been agreed so far. I cannot see how it can be consistent with the survival of the eurozone, given the policies of member states and the ECB.
Much of the language in this document is opaque constitutional jargon. But on the issues that matter, the ruling is surprisingly, and depressingly, clear. It says the German government must not accept permanent mechanisms - as opposed to the EFSF, which is temporary - with the following criteria: if they involve a permanent liability to other countries; if these liabilities are very large or incalculable; and if foreign governments, through their actions, can trigger the payment of the guarantees. If I were a plaintiff in this case, I would regard that statement as an open invitation by the court to bring a new case against the European stability mechanism.
...
Moreover, you cannot get around this unfortunate fact with an ingenious combination of eurocratic trickery and financial engineering. The court, quite cleverly, did not mention eurobonds. It talked about liabilities. The Bundestag is not precluded from giving money to Greece, but it cannot empower a third party, such as the EFSF or ESM, let alone a hypothetical European Debt Agency, from usurping sovereign power. Sovereignty can be delegated in small slices, but not permanently.

(Google link)

It would appear that only existing permanent institutions should be able to issue Eurobonds. That probable means either the ECB or the European Investment Bank. Or are those ruled out, too?

Economics is politics by other means

by Carrie (migeru at eurotrib dot com) on Mon Sep 12th, 2011 at 08:50:50 AM EST
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Re: Eurobond Vorbei? (4.00 / 4)

A couple of weeks ago Edward Harrison noted that the structure of all "bailout" agreements were collections of bilateral agreements between the country being rescued and the individual countries banding together to make the rescue. He maintained that this was due to insistence that all funds be traceable back to individual countries and suggested that this was so that the debts would survive even if the euro-zone did not. It would also be a mechanism to prevent the emergence of any super-national agency which could make commitments to which member states might individually object. This is clearly consistent with what we are seeing.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Sep 12th, 2011 at 09:41:07 AM EST
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See Varoufakis on Perfectly Separable Debts.

Economics is politics by other means

by Carrie (migeru at eurotrib dot com) on Mon Sep 12th, 2011 at 09:46:24 AM EST
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Harrison may have been citing Varoufakis, but I remember To The Finland Station -- one of my favorite works of historical analysis and historiography.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Sep 12th, 2011 at 11:33:16 AM EST
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correct link to punditocracy.

Economics is politics by other means

by Carrie (migeru at eurotrib dot com) on Mon Sep 12th, 2011 at 07:12:13 AM EST
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Danke. nothing there which shows Eurobonds as unconstitutional, unless the Bundestag is not involved on a case by case basis.

"Life shrinks or expands in proportion to one's courage." - Anaïs Nin

by Crazy Horse on Mon Sep 12th, 2011 at 07:19:13 AM EST
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But involving the Bundestag on a case-by-case basis would be akin to giving California veto powers over the US federal deficit (or Beyern veto power over the German ditto). While technically possible, it would be unacceptable in so many ways it's not even funny.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Sep 12th, 2011 at 07:42:12 AM EST
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Also not all Eurobonds are created equal. The ECB issued ones could still be ok even if the jointly issued ones are out. And if it is legal for the ECB to act as market maker of last resort for state bonds in the secondary market...

by generic on Mon Sep 12th, 2011 at 08:21:23 AM EST
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But is it legal for the ECB to issue bonds over the objections of the national parliaments? Let's not forget the ECB is owned by the 27 EU National Central Banks and each of these is "owned" by their respective Treasuries who capitalize their Central Banks and receive profits from them.

Economics is politics by other means

by Carrie (migeru at eurotrib dot com) on Mon Sep 12th, 2011 at 08:36:47 AM EST
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Re: Eurobond Vorbei? (4.00 / 3)

But is it legal for the ECB to issue bonds over the objections of the national parliaments?

Yes.

Central bank independence, remember.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Sep 12th, 2011 at 08:42:46 AM EST
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Who issues Eurobonds, then? The Bundestag?

Economics is politics by other means

by Carrie (migeru at eurotrib dot com) on Mon Sep 12th, 2011 at 08:12:41 AM EST
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