Earthquake hits the EU - but wait for the aftershock

The brawl between Germany and the EU over the ECB's QE will be one of the most spectacular fallouts since Maastricht. Get the popcorn out, and draw up a seat. 

Germany's Constitutional Court released a judgement on 5th May which essentially had two legs; that the Federal Government and the Bundestag were at fault in failing to challenge the ECB's PSPP (Public Sector Purchase Programme), and that the ECB had exceeded its authority by delivering the programme. Prior to forming a judgement, the court had referrred the question of the ECB's actions to the ECJ, which of course found that the central bank was not at any fault. The Constitutional court then ripped apart the ratio decidendi of the EU's political court in three tightly argued paragraphs and concluded -

In light of the aforementioned considerations, the Federal Constitutional Court is not bound by the CJEU’s decision but must conduct its own review to determine whether the Eurosystem’s decisions on the adoption and implementation of the PSPP remain within the competences conferred upon it under EU primary law. As these decisions lack sufficient proportionality considerations, they amount to an exceeding of the ECB’s competences.

Well, you can imagine the outrage in Brussels. The EU's political court is quite openly constituted to act to further the political aims of the EU - they don't even try to pretend it's not. The German Constitutional Court is concerned with the most fundamental basis upon which Germany was permitted to function as a nation after the period 1933 - 1945, the Grundgesetz, which set in concrete rules that would prevent the German people ever again repeating the actions of those years. Germany's membership of the EU is explicitly on the basis that the EU cannot legislate anything in contravention of the Grundgesetz - it is inviolable. 

Wolfgang Münchau writes in Marxist daily The Financial Times -

The ECB is, of course, not subject to German law. As an EU institution it answers to the European Court of Justice. But this ruling is binding on the Bundesbank. I doubt that Jens Weidmann, its president, will want to fob off the German judges with a superficial response. The ruling only allows the Germans to take part in the asset purchase programme for another three months unless they find a way to comply. Theoretically, the ECB could proceed without Germany. But I would strongly advise against it because that could precipitate a eurozone break-up.

The EU's political court was also not slow to assert its authority, and released a statement -

In order to ensure that EU law is applied uniformly, the Court of Justice (ECJ) alone ... has jurisdiction to rule that an act of an EU institution is contrary to EU law. Divergences between courts of the member states as to the validity of such acts would indeed be liable to place in jeopardy the unity of the EU legal order and to detract from legal certainty. Like other authorities of the member states, national courts are required to ensure that EU law takes full effect. That is the only way of ensuring the equality of member states in the Union they created.

In other words, the EU is telling Jens Weidmann of the Bundesbank that he should do as the ECJ says, not as his own Constitutional Court instructs him.

This is going to be massive.