Constitutional Challenge to Euro Bailout

Last week the German Constitutional Court made a very important ruling that may have long lasting consequences for Europe and the survival of the euro. What is particularly interesting in an Irish context is that their Courts examined the constitutionality of the Euro bailout with respect to German basic law and the federal powers of the German Government.

Notably the Constitutional Court ruled that the eurozone bailouts were compatible with German Basic Law, since they do not provide an excessive burden on the German budget, do not constitute a significant transfer of power away from the federal government, the Bundestag nor impact negatively on the euro’s purchasing power.

Interestingly the Court also ruled that, in order to conform to the German constitution, “the Federal Government is in principle obliged to always obtain prior approval by the German Parliamentary Budget Committee before giving guarantees.” and“The Bundestag, as the legislature, is also prohibited from establishing permanent mechanisms…which result in an assumption of liability for other states’ voluntary decisions, especially if they have consequences whose impact is difficult to calculate”.

What is evident is that the burden of the euro bailout on German taxpayers can be challenged in their Constitutional Courts and that those same courts can set the legal parameters on which any bailout must comply. How unfortunate that no such Court in Ireland similarly examined the constitutionality of the banking guarantee imposed on the Irish citizen and the transfer of billions of euros of private debt created by voluntary institutions, developers and limited companies both at home and abroad onto the Irish taxpayer.

I wonder is it not too late to still challenge the constitutionality of the Irish Banking Bailout? It is clear given the verdict of the German Courts that the banking bailout imposed on Ireland would be regarded as incompatible with German basic law if it was imposed on the German State given that in Ireland it has created an excessive burden on State and society, the State budget resulting in loss of economic sovereignty and the transfer of power from the nations parliament to the IMF and ECB; violating the very conditions imposed by the German Constitutional Court last week.

What a pity that we do not apparently have laws similar to those of the German legislature despite our common membership of the European Union. It appears that it’s one law of one member state and no law for another. In Germany their parliament is prohibited from establishing permanent financial mechanisms, which assume liability for other states decisions, including decisions to loan to private banks in Ireland. While in Ireland the taxpayer is instructed that we must assume liability for all private banking debt including voluntary decisions made by European banks to loan to private banks in other jurisdictions, an action that has resulted in an unsustainable level of debt burden with disastrous social and economic consequences both in Ireland and other peripheral European countries such as Greece. Impacts we unfortunately are only beginning to witness that will last for perhaps generations to come. In my mind there is no doubt that we must challenge the constitutionality of the Irish banking bailout and where the constitution may be seen to be weak in protecting the rights of Irish citizens it must to be changed to reflect the challenges that we now face.