Europe’s Crisis Goes to Court

Economists almost everywhere are debating potential solutions to the euro crisis, while failing to account for one crucial element of any resolution: the German Constitutional Court. But, given that no solution can be implemented without the court's approval, debates that disregard it are meaningless.

TILBURG – Throughout Europe and beyond, economists are debating potential solutions to the eurozone’s sovereign-debt crisis. But these discussions often neglect, or at least downplay, one crucial element of any resolution: the German Constitutional Court (Bundesverfassungsgericht) in Karlsruhe, which is responsible for determining whether measures taken by Europe’s leaders are legal under German law.

On September 12, the court will determine whether the European Stability Mechanism (ESM), Europe’s permanent emergency fund, complies with Germany’s constitution. Although German policymakers backed the ESM in June, ratification is on hold until the court’s ruling.

While other eurozone countries have similar courts, these tribunals have significantly less clout. The Supreme Court of Ireland, for example, has referred such matters to the European Court of Justice. And the recent ruling by France’s highest court that the ESM complies with the country’s constitution received little media attention, highlighting its relative insignificance.

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