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October 28, 2011 3:06 pm
Germany’s powerful constitutional court has thrown a spanner into the works of the eurozone’s rescue fund, issuing an injunction that would require the full German Bundestag to approve any urgent bond-buying operations by the European financial stability facility.
The surprise move is not a final decision by the court, but it means that the parliament cannot use a special nine-member subcommittee to take emergency decisions in secret, until the court gives its full ruling – possibly in December.
“We can only hope [the decision will be] soon,” said Martin Kotthaus, finance ministry spokesman.
Otto Fricke, budget spokesman for the liberal Free Democrats in the Bundestag, said bond market purchases by the EFSF would be “de facto impossible” until the court reaches a verdict.
Eurozone finance ministers have yet to negotiate the final details of ways to “leverage” the €440bn in the EFSF, to give the fund greater financial capacity to enable it to buy bonds in the secondary market.
The eurozone summit on Wednesday set a deadline of the end of November to reach agreement, making it unlikely that the fund will be ready to take such action in the near future.
The European Central Bank has intervened in the secondary markets by buying Spanish and Italian sovereign debt in recent weeks, in order to prevent bond yields soaring. But the ECB is keen to hand over that role to the EFSF as soon as possible.
The Karlsruhe-based court issued its injunction after two Social Democrat parliamentarians protested that their democratic rights and responsibility had been infringed by setting up the special subcommittee.
“The second senate of the constitutional court has decided ... that until a full decision is taken, the Bundestag’s right of participation may not be replaced by the new committee,” the court said in a statement.
The temporary ruling said that if bond-buying by the EFSF were given a green light before the court reached its final decision, the action would be irreversible.
On the other hand, the government’s capacity to act would not be interfered with, because it could always turn to the full parliament to get approval, according to the judges.
Thomas Oppermann, chief whip of the opposition Social Democrats, said it was clear that the full plenary session must now be summoned to approve the actions of the EFSF, pending a final decision by the court. Decisions could be prepared in the full budget committee, but not in a nine-person subcommittee.
Peter Altmaier, chief whip of the Christian Democrat group in the Bundestag, the lead party in the ruling coalition, said he would hold urgent negotiations with the other parties to ensure that the full budget committee or full parliament would be able to react to requests from the EFSF at any moment.
In a resolution passed this week before the eurozone summit, the Bundestag also urged that the ECB bond-buying operations should be phased out, once the EFSF was operational. But if the constitutional court were to confirm its ban on a special procedure for parliamentary approval, it might make it impossible for the fund to assume its new responsibility, analysts say.
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