High Drama in the High Court? ESM and Fiscal Compact in Legal Limbo
For months, policymakers and public alike could only wait with bated breath for the U.S. Supreme Court’s decision on President Obama’s health care reform law. As they pondered and deliberated the law’s constitutionality, the Court’s justices held Americans in suspense over the future of the polarizing and monumental reform. In the week leading up to the Court’s decision, media analyses and press pressure built into the sort of hype usually reserved for summer blockbusters of a more theatrical sort. The analysts at scotusblog.com, an unofficial blog kept by Supreme Court employees, had to upgrade their servers to handle exponentially increased traffic and, in the buildup to the decision, held a live blog, which was as close as readers were going to come to a live announcement from a court that still does not allow cameras. Now that the post-decision media frenzy has died down and new-found judicial junkies have had time to sleep off the hangover resulting from consuming the monstrous, 193-page opinion, Germany’s Federal Constitutional Court has stepped up with a case that should keep converts to constitutional law entertained.
With political and economic stakes at face value every bit as high as the Supreme Court’s decision on the Affordable Care Act—if not even higher—the Bundesverfassungsgericht’s examination of the European Stability Mechanism (ESM) and Fiscal Compact ought to arouse just as much excitement as the Supreme Court’s decision. So far, it has not.
The Bundestag approved both ESM and fiscal compact in late June, but opponents of further Europeanization complained to the Bundesverfassungsgericht that the treaty, if passed into German law, would unconstitutionally damage German sovereignty. For opponents of the law, the Merkel government’s agreement to the ESM and fiscal compact crossed a line in the sand separating begrudgingly accepted anti-crisis measures from intolerable integration. The Constitutional Court, acknowledging the climactic importance of the ruling to the future of Germany’s European policies, requested that Germany’s usually rubber-stamp president hold off on signing the ESM and fiscal compact until after it reached a decision. Adhering to custom, the president acquiesced, leaving the ESM and Fiscal Compact in limbo until the Karlsruhe-based court comes to a decision.
Originally, the Bundesverfassungsgericht estimated that it would reach a decision by July 10. That deadline has come and gone, leaving only an announcement that the Court would deliberate the issue more fully and delay a ruling, presumably until after the Court’s summer break. Perhaps surprisingly—and disappointingly for those hoping for more healthcare-style high court drama—media and markets reacted calmly. Because the fiscal compact does not come into effect until January 1, 2013, the Court’s delay only affects the ESM, which was supposed to open on July 1. However, because the European Financial Security Fund (EFSF) will continue operating until the end of the year, Europe is not left without a rescue mechanism in place. Furthermore, it is possible that markets already calculated on procedural delays before the ESM and fiscal compact would come into effect, explaining their apathy toward the Court’s lethargy.
Nevertheless, by withholding its decision the Bundesverfassungsgericht is quietly holding Europe hostage. Although Merkel’s government has expressed its confidence that the Court will pronounce the ESM and fiscal compact constitutional, legal uncertainty can only hurt European leaders’ efforts to alleviate the continent’s monetary woes. While lovers of high court drama may still have their show, this time only those with a particular taste for schadenfreude can hope for a surprise decision.