Andreas Vosskuhle, head of the constitutional court, said politicians do not have the legal authority to sign away the birthright of the German people without their explicit consent. "The sovereignty of the German state is inviolate and anchored in perpetuity by basic law. It may not be abandoned by the legislature (even with its powers to amend the constitution)," he said. "There is little leeway left for giving up core powers to the EU. If one wants to go beyond this limit – which might be politically legitimate and desirable – then Germany must give itself a new constitution. A referendum would be necessary. This cannot be done without the people," he told newspaper Frankfurter Allgemeine. The extraordinary interview comes just days before the Bundestag votes on a bill to revamp the EU's €440bn bail-out fund (EFSF), enabling it to purchase EMU bonds pre-emptively and recapitalise banks. Tensions are running high after it emerged over the weekend that officials are working on plans sketched by the US Treasury and the European Commission to "leverage" the firepower of the EFSF to €2 trillion, in conjunction with lending from the European Central Bank. Carsten Schneider, finance spokesman for the Social Democrats, demanded that Chancellor Angela Merkel and finance minister Wolfgang Schäuble clarify their "true intentions " before the vote on Thursday. "A new multi-trillion programme is being cooked up in Washington and Brussels, while the wool is being pulled over the eyes of Bundestag and German public. This is unacceptable," he said. Prince Hermann Otto zu Solms-Hohensolms-Lich, the Bundestag's deputy president and finance chief for the Free Democrats (FDP) in the ruling coalition, expressed outrage over the secret plans. "Unless the German finance minister can give an immediate assurance that there will be no leveraged formula, I will not vote for this law. We might as well dispense with months of negotiations if all this means is that the Bundestag will be circumvented and served cold left-overs," he said. The accusation that German leaders are conspiring with EU officials to emasculate the Bundestag is highly sensitive, going to the core of the raging debate in recent months over EU encroachments on German democracy.
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"The sovereignty of the German state is inviolate and anchored in perpetuity by basic law.
Andreas Vosskuhle, head of the constitutional court, said politicians do not have the legal authority to sign away the birthright of the German people without their explicit consent. "The sovereignty of the German state is inviolate and anchored in perpetuity by basic law. It may not be abandoned by the legislature (even with its powers to amend the constitution)," he said. "There is little leeway left for giving up core powers to the EU. If one wants to go beyond this limit – which might be politically legitimate and desirable – then Germany must give itself a new constitution. A referendum would be necessary. This cannot be done without the people," he told newspaper Frankfurter Allgemeine. The extraordinary interview comes just days before the Bundestag votes on a bill to revamp the EU's €440bn bail-out fund (EFSF), enabling it to purchase EMU bonds pre-emptively and recapitalise banks. Tensions are running high after it emerged over the weekend that officials are working on plans sketched by the US Treasury and the European Commission to "leverage" the firepower of the EFSF to €2 trillion, in conjunction with lending from the European Central Bank. Carsten Schneider, finance spokesman for the Social Democrats, demanded that Chancellor Angela Merkel and finance minister Wolfgang Schäuble clarify their "true intentions " before the vote on Thursday. "A new multi-trillion programme is being cooked up in Washington and Brussels, while the wool is being pulled over the eyes of Bundestag and German public. This is unacceptable," he said. Prince Hermann Otto zu Solms-Hohensolms-Lich, the Bundestag's deputy president and finance chief for the Free Democrats (FDP) in the ruling coalition, expressed outrage over the secret plans. "Unless the German finance minister can give an immediate assurance that there will be no leveraged formula, I will not vote for this law. We might as well dispense with months of negotiations if all this means is that the Bundestag will be circumvented and served cold left-overs," he said. The accusation that German leaders are conspiring with EU officials to emasculate the Bundestag is highly sensitive, going to the core of the raging debate in recent months over EU encroachments on German democracy.
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German politicians told the Guardian of their dismay at reports following the last weekend's meeting of the International Monetary Fund about beefing up the existing bailout fund – known as the European Financial Stability Facility.
Frank Schäffler, a politician from North Rhein-Westphalia, said any scheme to bolster the fund from its existing €440m capacity would be a "catastrophic development" that he feared would lead to inflation.
"It must be stopped," he said in a phone interview. Schäffler is from the pro-business Free Democratic Party (FDP), which rules in coalition with the Christian Democratic Union (CDU) of the chancellor, Angela Merkel.
Germany's finance minister, Wolfgang Schäuble, appeared to downplay any attempt to bolster the EFSF. "We do not intend to increase it," he said in a television interview.
His remarks came after European markets closed and after France's CAC40 closed 1.8% higher and the Dax in Germany rose 2.9% – but not after moving 6% from peak to trough. Gains in London were more muted with the FTSE index ending 0.4% higher at 5,089.37, while Wall Street was gyrating.
If le TARP is too invasive, debt guarantees are mere palliatives.
Granted, guarantees—in which the EFSF would promise bond investors to repay them if a lender goes under—cost less than full-blown recapitalizations and only pay out in case of bank failures.
But it is difficult to see how such instruments would lure jittery investors back to European bank debt. And they also would leave taxpayers with the ultimate cost of any rescue, with the added drawback that if a financial institution does go bankrupt, the authorities would have to recapitalize the whole banking system anyway.
There is, however, a third way and it passes through Omaha. Europe should copy the way Warren Buffett buys into companies in times of trouble.
In 2008, when Goldman Sachs Group Inc. and General Electric Co. needed cash and a jolt of confidence, the legendary investor demanded nonvoting preferred stock with a fat annual dividend and warrants to buy shares at reduced prices in the future. He recently struck a similar deal with Bank of America Corp.
Translated into Europe, the Sage's playbook could work thus: Ailing European banks would issue contingent convertible bonds, affectionately known as co-cos, to European authorities, and, crucially, private investors.
Prince Hermann Otto zu Solms-Hohensolms-Lich, the Bundestag's deputy president and finance chief for the Free Democrats (FDP) in the ruling coalition, expressed outrage over the secret plans.
"Unless the German finance minister can give an immediate assurance that there will be no leveraged formula, I will not vote for this law. We might as well dispense with months of negotiations if all this means is that the Bundestag will be circumvented and served cold left-overs," he said.
The accusation that German leaders are conspiring with EU officials to emasculate the Bundestag is highly sensitive, going to the core of the raging debate in recent months over EU encroachments on German democracy.
Dr Vosskuhle said that the improvisation of far-reaching policies had become "dangerous", and warned against schemes to circumvent the rule of law with backroom deals. "Germany has a great affinity for the rule of law. People expect the political class to obey the rules."
He reminded leaders that the court had set clear boundaries to EU bail-outs in a ruling earlier this month, although it gave the go-ahead for the package of measures agreed so far.
"Our judgment makes clear that the Bundestag cannot abdicate its fiscal responsibilities to other actors. And no permanent mechanism may be created that entails taking over the liabilities of other states," he said. When asked whether eurobonds are off limits, Dr Vosskuhle said any ruling by the judges would be "pretty clear".
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