The OMT Case: Institution Building in the Union and a (Failed) Nullification Crisis in the Process of European Integration

Abstract

This article examines the birth and development of the OMT program and its implications for the EU integration process. Following this, the OMT case is analyzed from two perspectives. First, as an example of “Institution building” in the European Union: developments that lasted two years (2010-2012) that allowed it to establish a “permanent” program that protects the effective exercise of ECB monetary policy. The legality of the OMT was recently confirmed by the Court of Justice in the Gauweiler judgment, taking stock of the Pringle decision. Second, the OMT case reveals evident Member State dissatisfaction with the working of the European Union. This is highlighted in the sui generis preliminary reference of the 2014 German Constitutional Court - for the methods and the conclusion reached - on the legality of the OMT. The BVerfG reference led to the 2015 Gauweiler judgment. This position (as well as, before it, the position of the Bundesbank on the same issue) shows, ultimately, a distrust in the ability of the Union to enact, in the general interest of the Member States, measures in areas where the legislative power is now transferred to the European level.

This situation resembles mutatis mutandis the 1832 “nullification crisis” between the State of South Carolina and the Federal Government of the United States of America. By analyzing this phase of American legal history, the article tries to identify a common pattern of behavior in “two tier legal systems” - such as the US and the EU - in their respective integration processes. This historical comparison sheds light on the peculiarity of the European integration process vis-à-vis the US experience and highlights the risks that lie ahead in the EU integration process.

JEL Classification: K1, K20, E58