In response to the financial crisis in the EU, a permanent crisis mechanism – the European Stability Mechanism (ESM) – was adopted by the euro area Member States. A number of cases, lodged with the German Federal Constitutional Court (BVerfG), aimed at blocking Germany’s participation.
The BVerfG has established four requirements for German participation in rescue packages and fiscal stability mechanisms: observance of the Bundestag’s budgetary autonomy, prior consent of the Bundestag to participation in rescue packages, influence of the Bundestag on spending of funds and limited participation in large rescue packages. According to the BVerfG, in order for further EU integration to be in line with the Basic Law (German Constitution) any transfer of powers needs to be democratically legitimated by the Bundestag. Certain state powers, e.g. budgetary decisions, cannot be given up through European integration.
In March 2014, the BVerfG delivered a final judgment confirming Germany’s participation in the ESM. It thus followed the line of its September 2012 interim ruling, in which it had refused to issue a temporary injunction against the ratification of the ESM Treaty and the fiscal compact, provided the liability limits are clarified and the information rights of the Bundestag guaranteed. The rulings have been broadly welcomed, although there are fears that they could lead to the “disarming” of the ESM, and worries about the consequences of the rulings where further EU integration is contemplated.