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Bailout battle

July 5, 2011

Germany's part in the financial bailout of Greece and other struggling EU states faces a legal challenge at the Federal Constitutional Court in Karlsruhe. Critics of the bailouts say they could be unconstitutional.

https://p.dw.com/p/11pT1
The Constitutional Court
A verdict could take the court monthsImage: AP

Germany's Constitutional Court in Karlsruhe heard on Tuesday from both sides of a case that calls into question the constitutionality of the country's multi-billion-euro bailouts for troubled members of the eurozone.

The legal challenge was filed by a group of prominent euroskeptic politicians and professors, who argue that the bailouts for Greece, Ireland and Portugal violate the German constitution.

One of the main issues is whether the bailouts violated the German parliament's right to maintain oversight of the country's budget.

"If [the German parliament] the Bundestag can no longer decide on the money coming in from taxes, then it can no longer exercise its most important right - budgetary control," said economist Joachim Starbatty, one of the original plaintiffs in the case. "[The Bundestag is] elected by the citizens to take decisions on tax rises and revenues."

Defending the bailouts

German Finance Minister Wolfgang Schäuble defended the bailouts in front of Germany's top court, saying a common currency depended on the solidarity of its individual members.

Wolfgang Schäuble
Schäuble defended the government's decisionsImage: picture alliance/dpa

He added that parliament was adequately involved in the decision to activate mechanisms that contributed to larger European bailout measures.

Although the plaintiffs say they don't expect a ruling to stop the current bailout mechanism, the Karlsruhe court may set requirements for future bailouts. A decision is not expected for months, but the rest of Europe is keeping a close eye on the proceedings to see how much wiggle room the German government will have down the road in similar situations.

No credit for credit agencies

Meanwhile, German Chancellor Angela Merkel warned against taking too much account of credit rating agency warnings about the involvement of private investors in the second bailout package for Greece.

On Monday, the rating agency Standard & Poor's cautioned against the involvement of private banks and insurers, saying that, if even the slightest pressure were applied by governments, this would amount to declaring that Greece was insolvent.

However, Merkel said on Tuesday that she mainly relied on the assessments of the three main public institutions when considering such matters: the International Monetary Fund, the European Central Bank, and the European Commission.

"It's important that the three don't let their ability to make their own judgments be taken away from them," Merkel told reporters in Berlin Tuesday.

Author: Matt Zuvela (dpa, afp)
Editor: Michael Lawton