Der Spiegel alleges ‘Kohl administration misled Constitutional Court’ on EMU risks in 1998 – So what’s the likely impact on GFCC deference going forward?

Prof. Peter Lindseth

My earlier post on the so-called Target2 controversy in Germany concluded with a query. I wondered whether the possible risks associated with the Target2 imbalances might lead judges on the German Federal Constitutional Court (GFCC) to reconsider the usual deference—the ‘margin of appreciation’—that the Court has traditionally given to political and technocratic decision-makers on substantive matters relating to the EMU. The risks specifically associated with Target2 imbalances may not in the end prove as decisive to this discussion as I originally thought (I’m still thinking about this, but see here and here).  Nevertheless, the question of judicial deference to political and technocratic decision-making relating to the EMU remains open, particularly as the Eurozone crisis deepens.  If Target2 is not the thing that leads the GFCC to reconsider its usual deferential attitude, then perhaps something else will.

That ‘something else’ could be a report in Der Spiegel on Monday entitled ‘Operation Self-Deceit: New Documents Shine Light on Euro Birth Defects’.  Cutting directly to the chase, Der Spiegel writes:

“The documents that have now been released suggest that the Kohl administration misled both the public and Germany’s Federal Constitutional Court. Four professors had at the time filed a lawsuit against the introduction of the euro. The suit was “clearly without merit,” the government told the court, arguing that it would only be justified in the event of a “substantial deviation” from the Maastricht criteria, and that such a deviation was “neither recognizable nor to be expected.”

Really? Following a meeting between the chancellor, Finance Minister Theo Waigel and Bundesbank President Hans Tietmeyer, on the case before the Federal Constitutional Court, the head of the economics division at the Chancellery, Sighart Nehring, noted in mid-March 1998 that “enormous risks” were associated with Italy’s “high debt levels.” The debt structure, Nehring added, was “unfavorable” and outlays would increase considerably if interest rates rose by only a small amount.

But the memo had no repercussions. The chancellor, it would seem, wasn’t terribly interested in the details. There was a “built-in flexibility” among politicians when it came to the Maastricht criteria,” says Dieter Kastrup, German ambassador to Italy at the time.”

This passage contains quite an allegation, particularly in the first paragraph, and obviously we must await further investigation to see if it holds up.  My particular question is especially whether allegations of this type might affect the attitude of the GFCC vis-à-vis German government claims about the legality of the EMU and the crisis response going forward.

In the 1998 decision to which Der Spiegel refers, the Court certainly took a strongly deferential approach.  The Court clearly did not want to be drawn into reviewing the merits of the government’s decision concerning the advisability of the entry into the third stage of the EMU.  The key passages from the official English translation are paras. 99-105, which stress ‘the competence and responsibility of the Federal Government and parliament’ (para.99).  As the Court specified (para.100), the decision to proceed to the third stage:

“call[s] for empirical findings, assessments and evaluations that can be based only approximately on empirical knowledge. Assessing the developments requires analyses and predictions using practical reason that allow only probability judgements but do not convey certainty. The overall assessment of a high degree of lasting convergence and the associated forecast for a durable stability community call for decisions from the responsible bodies in which factual findings, empirical values and deliberate creativity are mixed in fluid transitions. Insofar as the Treaty also requires a certain approach to reference values as a legal basis for the criteria of budget deficit and indebtedness pursuant to Art. 104c(2) ECT, the decision builds upon a forecast that can only be an assessment according to probability and must therefore be extrapolated in accompanying tests and decisions. In this sphere of legally open factual positions between economic knowledge and political creativity, the Basic Law assigns the responsibilities for decision to government and parliament (Art. 23(2) ff. Basic Law)”

Given that this passage stresses the ultimate importance of both ‘economic knowledge and political creativity’ in the probabilistic determinations relating to the EMU, I’m left wondering whether the allegations of Der Spiegel would really affect the deferential attitude of the GFCC on substantive questions (procedural questions, such as the scope of parliamentary involvement, are another matter entirely).  Certainly if the Court were really to conclude that governments had actually lied to them in the past, or at least not have been fully honest with themselves and therefore the Court, this may well affect the Court’s deferential attitude going forward. At least it may lead to more vigorous questionning of government representatives during oral argument, or more demands that future governments be more transparent with the Court regarding the nature and scope of their internal debates over the risks associated with the EMU.

Even if the Court struggles to remain deferential on questions of substance, as the crisis deepens it would still be understandable that the Der Spiegel allegations could make the Court more skeptical toward government claims in the future.  Again, we will need to wait and see. But it might also be worth recalling the closing thoughts of my earlier post: ‘perhaps the judges on GFCC might [eventually] realize that the usual “margin of appreciation” given to technocrats and policy-makers in the construction of the common currency was, in this instance at least, misplaced’.  If they do come to that realization, the legal consequences could be potentially profound.

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