Bundesverfassungsgericht

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Application for a temporary injunction to prevent the euro rescue package unsuccessful

Press Release No. 38/2010 of 10 June 2010

Order of 9 June 2010
2 BvR 1099/10

In the interest of the financial stability of the entire euro area, the states of the euro group in May 2010, at the request of Greece, declared their willingness to make considerable financial aids available - in connection with a three-year programme of the International Monetary Fund (IMF) - to support Greece with their own bilateral loans, in addition to financing by the International Monetary Fund (see on this in greater detail Federal Constitutional Court, order of the Second Senate of 7 May 2010 - 2 BvR 987/10 -, Neue Juristische Wochenschrift (NJW) 2010, p. 1586, press release no. 30/2010 of 8 May 2010).

On 7 May 2010, the Heads of State or Government of the euro group met in Brussels and agreed, among other things, that the EU Commission should propose a European stabilisation mechanism to preserve stability in the European financial markets ("euro rescue package"). The Economic and Financial Affairs Council (ECOFIN Council) therefore decided to establish a European stabilisation mechanism, consisting of the European Financial Stabilisation Mechanism (EFSM) on the basis of a EU Regulation on the one hand, and of the European Financial Stability Facility (EFSF), a special purpose vehicle for providing loans and credit lines based on an intergovernmental agreement of the euro group Member States, on the other hand. The European Central Bank (ECB) joined the new rescue programme on 10 May 2010 by deciding to itself purchase government bonds from then on.

Council Regulation (EU) No 407/2010 of 11 May 2010 establishing a European financial stabilisation mechanism (OJ L 118/1) is based on Article 122(2) of the Treaty on the Functioning of the European Union (TFEU). According to this provision, a Member State which is in difficulties or is seriously threatened with severe difficulties caused by exceptional occurrences beyond its control may be granted financial assistance by the EU. The Council holds the view that the exceptional situation consists in the deepening of the global financial crisis having led to a severe deterioration of the borrowing conditions of several euro group Member States beyond what can be explained by economic fundamentals.

Apart from introducing the EFSM, the Heads of State or Government of the euro group committed to rendering financial assistance via a special purpose vehicle, the EFSF, which is being founded at present. The EFSF's future purpose was laid down as the issuance of bonds and the grant of loans and credit lines to cover the financing requirements of euro group Member States in difficulties subject to certain conditions. The guarantees for the special purpose vehicle to the amount of 440 billion euros are distributed among the euro group Member States on a pro rata basis according to their participation in the ECB capital. In addition, a framework agreement was to be concluded between the participating euro group Member States and the planned special purpose vehicle to regulate further details concerning the issuance of bonds in the capital market by the special purpose vehicle, the guarantee commitment made by the euro group Member States and the details of the grant of loans (see EFSF Framework Agreement, which has since been modified several times, draft of 20 May 2010). According to Germany's participation in the ECB capital, the German share of the guarantee amount was to be set at 123 billion euros; in the case of unforeseeable and irrefutable need, it was possible to exceed the amount by another 20 per cent (see Bill of the CDU/CSU and FDP parliamentary groups, Bundestag printed paper (Bundestagsdrucksache - BTDrucks) 17/1685, p. 1), which would lead to a maximum volume of approximately 148 billion euros.

To create the preconditions at national level for rendering financial assistance via the special purpose vehicle (EFSF), the German Bundestag adopted on 21 May 2010 the challenged Act Concerning the Giving of Guarantees in the Framework of a European Stabilisation Mechanism (Gesetz zur Übernahme von Gewährleistungen im Rahmen eines europäischen Stabilisierungsmechanismus, hereinafter: Euro Stabilisation Mechanism Act, Federal Law Gazette (Bundesgesetzblatt - BGBl) I p. 627), which was approved by the Bundesrat on the very same day and was promulgated on 22 May 2010.

After the approval of the Euro Stabilisation Mechanism Act by the Bundesrat, the complainant lodged a constitutional complaint on 21 May 2010 challenging a violation of his fundamental rights under Article 38.1, Article 14.1 and Article 2.1 of the Basic Law (Grundgesetz - GG), and made an application for the issuing of a temporary injunction.

The Second Senate of the Federal Constitutional Court did not grant the complainant's application for the issuing of the temporary injunction sought. The result of the weighing of consequences which is required for the issuing of a temporary injunction is that the general public would be under the threat of serious disadvantages if the temporary injunction were issued and the authorisation to give the guarantee were to prove permissible under constitutional law later on. The "euro rescue package" and the purchase of government bonds by the ECB are intended to counteract a loss of confidence in individual euro group Member States' ability to pay. According to its economic performance, the Federal Republic of Germany takes a considerable share in the safeguarding measures. If due to the issuing of the temporary injunction sought, the Federal Republic of Germany, which is regarded as unrestrictedly solvent in the financial markets, had to suspend, if only temporarily, its commitments, this would, according to the Federal Government's assessment, already result in a decrease of confidence on the markets whose consequences would be unforeseeable.

This assessment of the Federal Government is not shared by the complainant, who rather regards the measures as additional risks exactly to the stability of the European currency. The Federal Constitutional Court, however, cannot, and indeed need not, clarify this issue in the temporary injunction proceedings. When it comes to assessing foreign-policy situations, which in this context include the situation of the international financial markets, the Federal Government, in a system characterised by the separation of powers, has, due to its competence for the subject-matter, to its special proximity to the issue and its political responsibility, a prerogative of assessment which must be respected by the Federal Constitutional Court, provided that its assessment is not definitely refuted (see Decisions of the Federal Constitutional Court (Entscheidungen des Bundesverfassungsgerichts - BVerfGE 97, 350 (376); Federal Constitutional Court, order of the Second Senate of 7 May 2010, loc. cit., p. 1587).

A withdrawal, even a temporary one, of Germany from the rescue measures would not only reduce the volume of the "euro rescue package" proportionally. In the Federal Government's view, such withdrawal might call into question the entire realisability of the rescue package, from the financial markets' perspective at any rate. This would probably create serious economic disadvantages for the general public. Should the objective pursued by the euro stabilisation mechanism be missed, i.e. should it not be possible to prevent a possible threat of illiquidity in important trade centres of European government bonds, the stability of the entire European Monetary Union would, in the view of the Federal Government, be endangered. The Federal Constitutional Court has no sufficient indications which would oblige it to assume that the Federal Government's currency-policy and financial-policy assessment is erroneous (see BVerfGE 26, 259 (264); 29, 179 (182); 88, 173 (181)).

In comparison, the disadvantages carry less weight which ensue if the temporary injunction is not issued but making use of the authorisation to give the guarantee proves impermissible later on. The mere possibility of the Federation being burdened in the event of the European financial stabilisation mechanism being made use of, i.e. in the case of an imminent situation of financial emergency of a euro group Member State, an event whose probability of realising is regarded as minor by the Federal Government, will not cause substantial damage to the common good. The complainant has not submitted any specific indications to substantiate that in comparison, his fundamental rights and rights equivalent to fundamental rights, especially his right under Article 14 of the Basic Law, could already be directly impaired in a serious and irreversible manner precisely as a consequence of a possible giving of loan guarantees or of the purchase of government bonds by the ECB. Insofar as the complainant argues that the disappointment of the confidence in the law caused by the violation of the European Treaties alleged by him will result in irreversible damage to the Community currency, he contradicts the Federal Government's assessment, which the Federal Constitutional Court must respect for the reasons specified.