Understanding the German Constitutional Fault Lines in the Eurozone Crisis: Der Spiegel’s interview with Udo Di Fabio

Prof. Peter Lindseth

Greetings from Germany.  This week I begin a semester as the Daimler Fellow at the American Academy in Berlin. From the truly idyllic confinesof the Academy, I look forward to continuing my blogging on matters European, and more specifically on some of the legal and constitutional implications of the ongoing Eurozone crisis.

To kick things off, I wanted to alert readers to something they may have missed over the holiday break: a fascinating interview with Udo Di Fabio, the outgoing member of the German Federal Constitutional Court (FCC), published in late December in Der Spiegel’s online English edition (the original German version can be found here).

The interview is revealing on a number of levels. Via some of the interviewers’ questions, as well as some of the odd choices of the translator, it reveals a range of common misunderstandings regarding the nature of the integration process as well as the FCC’s attitude toward it. Despite these misunderstandings, however, Di Fabio’s responses are instructive regarding some of the key constitutional fault lines that will undoubtedly shape the FCC’s approach to the Eurozone crisis going forward. The piece is worth the read by anyone interested in the crisis in all its many dimensions, not merely economic, financial, or political, but also legal and constitutional, particularly with regard to the crucial German case.

First a bit of background:  As readers of this blog know well, the FCC has played, and will continue to play, a critical role in defining the constitutional parameters of Germany’s role in the ongoing struggle to resolve the Eurozone crisis.  The Court’s jurisprudence will necessarily loom large as long as Germany serves as the Eurozone’s paymaster, and as long as the Court insists, as a matter of domestic constitutional law, on two conditions related to that function:  first, that Germany’s financial participation in any bailouts must be determinate and not open-ended (i.e., no Eurobonds or other instruments amounting to joint and several liability); and second, that the national legislature must, consistent with historically grounded yet evolving conceptions of parliamentary democracy, be given an effective voice in approving the extent of Germany’s financial participation.  The FCC views these two conditions as essential to preserving Germany’s democratic sovereignty in the face of the evident functional demands of the crisis, even as the Court otherwise permits, indeed even encourages, further European integration.

In the current environment, these parameters will be critical because the resolution of the crisis will almost certainly demand some very costly sacrifices by the German taxpayer.  As David Cameron noted earlier this week, ‘massive transfers of wealth’ from Berlin are becoming ever more probable, unless the debtor countries in the Eurozone find a way to close their ‘fundamental competitiveness divides’ with Germany sometime soon.  This is unlikely to occur, at least within the confines of the common currency and the fiscal discipline that the German government continues to demand as a condition of membership. Thus the Eurozone faces something of a Catch-22, which it can only escape if and when Germany realizes that at some point it must make those significant ‘wealth transfers’ to preserve the Euro in some form.

Whether—or more precisely, under what terms—Germany will make the needed outlays is a question on which the FCC will necessarily have a significant say.  And although Udo Di Fabio will no longer be part of the Court’s deliberations (his twelve-year term is now up), his influence will undoubtedly continue to be felt.  As the Der Spiegel interviewers suggest, Di Fabio was the Court’s recognized ‘expert on Europe’; hence the importance of this interview.

But first we must clear away some of the misleading aspects of the exchange before getting to the essential.  The title of the online English version of the interview, purportedly quoting Di Fabio, is: ‘It is a Mistake To Pursue a United States of Europe’.  The effect is to convey that Di Fabio opposes what the interviewers suppose to be the indisputable telos of integration: a ‘United States of Europe’.  In fact, what Di Fabio said was this: ‘The attempt to follow the federal state model [emphasis added], I think, is a mistake’ [Den Versuch, dem bundesstaatlichen Modell zu folgen, halte ich für einen Irrtum]. Di Fabio’s reference to the ‘federal state model’ was in response to the question ‘Wouldn’t it be easier to form a European federal state, one that is democratic and based on the separation of powers?’ [Wäre es da nicht einfacher, einen gewaltenteiligen, demokratischen, europäischen Bundesstaat zu bilden?]  His response simply noted that, as compared to the more complex ‘network’-type governance that currently prevails in the EU, following the ‘federal state model’ would not necessarily be ‘easier’.  Indeed, adopting such a model ‘could give rise to even greater difficulties than the current Union with its many weights and counterweights that make a balance possible’ [könnte weit größeren Zerreißproben ausgesetzt sein als die gegenwärtige Union, mit vielen Gewichten und Gegengewichten, die eine Balance ermöglichen].  His argument is consequentialist, not bound up with some abstract debate over the desirability of a ‘United States of Europe’.

The question to which he was responding—with its emphasis on what is purportedly ‘easier’ and also more democratically legitimate—arguably reflects a broader mindset on the part of his interviewers—Thomas Darnstädt and Dietmar Hipp.  Throughout the exchange, their queries entailed a classic mixture of functionalism and idealism with regard to the integration process—functionalism in that they repeatedly argue that the process is driven primarily by the functional incapacities of nation-states and their institutions (parliaments and courts); idealism in that they apparently believe that supranational governance is somehow capable, unproblematically, of legitimizing itself in some novel democratic and constitutional sense—if only retrograde actors like the FCC and Di Fabio would clear the scene.  (Darnstädt was recently the lead author in a series of articles in Der Spiegel that raised many of the same points, ultimately celebrating the views of the German philosopher Jürgen Habermas, whom Der Spiegel often seeks to highlight.) Perhaps the same mindset accounts for the stress the interviewers placed on the possibility, voiced by some Euro-enthusiasts in Germany, that the Basic Law should be amended to strip the FCC of jurisdiction over questions relating to integration.  Di Fabio rightly dismissed this eventuality as a Phantomdebatte—a ‘phony debate’—that is, a diversion, and a deeply unlikely one: ‘I don’t think anyone wants to remove this power of review from the Constitutional Court. It is part of the identity of a highly successful republic’.

It should be said, however, that there is undoubtedly a measure of truth in the functionalist claim regarding member state capacities, as well as in the realization that a federalist idealism has long motivated ardent integrationists and thus the process more generally.  But as Di Fabio makes clear, these functional and federalist impulses have not, as yet, been sufficient to displace national democratic and constitutional bodies as centers of decision-making on key questions, most importantly the financial liabilities of individual member states.  In effect, Di Fabio suggests that what integration needs at this point, consistent with views expressed here previously, is a reconciliation between, on the one hand, these functional and political-cultural demands and, on the other, historical commitments to constitutional democracy in a historically recognizable (alas, still national) sense.

The FCC, as Di Fabio points out, has recently made a significant concession to such functional demands, as part of its Greek bailout decision in September.  The Court has recognized that oversight by the Budgetary or the European Affairs Committees, rather than by all 620 members of the Bundestag, satisfies the demands of democratic legitimation in Germany’s response to the Euro crisis.  Indeed, the Court may go further in the current dispute over the nine-member emergency committee that the Bundestag established in response to the Greek bailout decision (which the Court may ultimately find is needed to deal with certain market operations of the EFSF that necessarily require expedited and confidential approval).

But as Di Fabio also points out, these functionalist concerns cannot be used ‘to leave parliament out in the cold’ entirely.  European integration, like processes of globalization more generally, has long entailed ‘executive dominance’, and parliaments have found ‘themselves constantly chasing to catch up’.  In this regard, Di Fabio argues that the FCC has ‘acted as a catalyst’ for the Bundestag’s increasingly ‘self-confident’ role, by enforcing the balance of powers and the protection of institutional rights against unreasonable encroachment and erosion.  The purpose is to preserve the democratic and constitutional character of the state—the typical role of constitutional jurisdictions in all modern democracies.

It is here—on the question of policing legal and constitutional commitments—that we get to the essential in the Di Fabio interview.  It is here that Di Fabio arguably illuminates the constitutional fault lines in the Eurozone crisis (the ‘sticking point’ as he calls it).  As all good lawyers know, and as I teach my students every day, the law is about drawing boundaries and defining tests to determine on which side of a particular legal frontier you find yourself.  On the one hand, Di Fabio apparently shocked his interviewers by expressing little discomfort with the sort of supranational oversight of national budgets that will likely to result from the new ‘fiscal union’ currently under negotiation:

SPIEGEL: . . . If the national budget falls under the control of the European Commission, the next Constitutional Court veto will be just around the corner.

Di Fabio: Not necessarily. Since no politician really intends to transfer [his or her] power of disposition over the substance of the national budget [to the] EU level, there is no insurmountable obstacle.

SPIEGEL: Does it [go to] the substance when a Brussels fiscal commissioner says to the German parliament, the Bundestag: You’re not allowed to pass this budget?

Di Fabio: If Brussels only more closely supervises whether the member states are adhering to the agreements that they have concluded, then this does not constitute an infringement on their [democratic] identity. Anyone who voluntarily agrees to something has to accept that they will be checked to ensure that this contractual obligation is fulfilled. . . .

SPIEGEL: If the European Commission imposed strict regulations on individual countries aimed at debt reduction – and Germany could one day also be on the receiving end of such measures – this would place very narrow limits on the parliament’s right to determine the budget.

Di Fabio: Each case would have to be examined individually. In principle, if a parliament has passed an act committing itself to the Maastricht stability criteria, it has to accept that violations will not go unsanctioned.

In short, the legal and constitutional legitimacy of supranational supervision of the national budget is to be found in the national legislative (pre-)commitment to fiscal discipline.  The delegation of authority to a supranational body to assist the national legislature in remaining within the confines of its fiscal commitment is entirely unproblematic from a democratic and constitutional legitimacy standpoint, as long as the nature of that commitment is clear and predictable in the instrument of delegation itself.  In these circumstances, the national legislature will simply have committed itself in advance to a limitation of its sovereign rights, without having abandoned sovereignty itself (something an earlier post on this blog also tried to point out).

So where, then, is the constitutional fault line in Germany?

Di Fabio: The court has already clarified where there is a sticking point. If financial guarantees were to become colossal or Germany were to be made liable against its will, then the judges would perhaps say: This can no longer conceivably be regarded as covered by the principal of democracy.

SPIEGEL: A transfer union wouldn’t generally violate the Basic Law?

Di Fabio: The EU has always had transfer characteristics in the agricultural sector. It depends on what the national parliaments can responsibly support with their own individual decisions. If Germany subjects itself to a mechanism whereby European and intergovernmental organs have access to revenues and expenditures that have an effect on the budget, with no right of veto by the Bundestag, then we have a democratic problem.

SPIEGEL: Would euro bonds be such a mechanism?

Di Fabio: In principle, yes, they probably would. But the extent to which this would be a democratically sound move by the Bundestag depends on the concrete form.

Di Fabio’s interlocutors found it difficult to comprehend the legal line that he, and by extension the full Court, had been drawing:  ‘So nation-state policies in no way take precedence over European ones?’, they asked.  Di Fabio struggled to get them to see that ‘[t]hose are erroneous categories’ and that the FCC’s jurisprudence was not inveterately opposed to integration.  Indeed, the Lisbon decision authored by Di Fabio acknowledged ‘that the Basic Law not only provides permission, but even entails an obligation to pursue European integration’.  Darnstädt and Hipp responded that ‘[t]he author of the decision on the Lisbon Treaty obviously had an entirely different intention than what was understood by politicians and the general public’.

Perhaps the problem is that politicians and the general public (or rather journalists) sometimes don’t take the time to read, much less understand the reasoning or holdings of courts, relying instead on stray, misleading, or superficial quotations.  Lawyers, one would hope, should know better. The jurisprudence of the FCC with regard to Europe, alas, has long been misunderstood, especially in the English-speaking world.  It is time that we all recognize—lawyers, politicians, journalists, the general public, whether German or non-German—the difficult balance that the Federal Constitutional Court has been attempting to strike in its integration decisions, including those relating to the Eurozone crisis. Reading this fascinating interview should help us all in that task.  As Udo Di Fabio concludes:  ‘An open, integrated state, which nonetheless remains sovereign and functioning, is an indispensable building block, even in an increasingly integrated Europe’.

One thought on “Understanding the German Constitutional Fault Lines in the Eurozone Crisis: Der Spiegel’s interview with Udo Di Fabio

  1. Pingback: InsolvenzVerschuldung

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