Update 18:00 The new German anti euro party Alternative für Deutschland have put out a press release claiming that di Fabio's report is a "body blow for the euro rescuers" and that he is corroborating AfD's stance that the ECB's bond buying constituting illegal state financing.
We have frequently pointed out the significant role played by the German Constitutional Court in the eurozone crisis, including before it came to be in vogue. The Court is due to hold hearings next week into the ECB’s handling of the eurozone crisis, specifically whether the legality of the new OMT bond-buying programme. In an interesting development ahead of the hearings, Udo Di Fabio – a prominent legal scholar and former German Constitutional Court judge has warned that if the Court rules that the ECB has violated its ban on state financing, in the most extreme case, the Court could then commit the German Parliament and Government to withdrawing from the euro.
This is the key quote from his report:
"If the rulings of the Constitutional Court were unsuccessful in influencing the federal acting bodies, it [the GCC] would have to make an extreme-case ruling that the further participation of Germany in such a system would be constitutionally untenable."This is admittedly an unlikely scenario – we expect the Court to approve the measure albeit with some additional conditionality and carefully expressed warnings for the ECB not to go too far – this has been standard procedure in the big EU/eurozone cases recently. Ultimately, despite the legal ambiguity surrounding the ECB and the wider handling of the eurozone crisis, the Court is mindful of the fact that it does not operate in a political vacuum. Di Fabio’s warning does however highlight that compliance of the German legal establishment cannot be taken for granted indefinitely.