Court ruling

Germany's Constitutional Court in Karlsruhe is due to announce on Wednesday whether Berlin's contribution to loans for Greece and other struggling eurozone countries is legal. The 17-nation bloc will be watching the verdict closely: An adverse ruling could call into question a planned permanent EU bailout mechanism.

German lawmakers have passed legislation on the eurozone's safety net program and on bailing out Greece, but time was too short for them to make an informed decision, according to economist Joachim Starbatty.

Starbatty heads a group of legal experts - and euroskeptics - who filed a complaint with the Karlsruhe-based Constitutional Court, one of several separate complaints the court received concerning the creation of the permanent eurozone bailout fund, called the European Stability Mechanism (ESM).

The laws allowing the ESM and the Greek bailout are a breach of parliament's sovereign budgetary rights, Starbatty told Deutsche Welle. "Parliament's hands are tied," he said. "Taking away a parliament's central budgetary sovereignty in the light of the threat to the euro can't be the purpose of European development."

Trickle of information

The government pushed the bailout legislation through parliament unnecessarily quickly, admits Manuel Sarrazin, a Green party member of the Bundestag's European affairs committee.

That, however, was not the point Starbatty and his allies were trying to make to the Constitutional Court.

"The petitioners aren't opposing how the Bundestag was treated, but rather the measures that were passed," he said.

Instead, they want to get the court to reject the euro, which they had already attempted to do in the past, Sarrazin says.

But Karlsruhe is unlikely to block the contributions to the Greek aid or to the bailout fund, he adds. Sarrazin says the court would put the focus on whether the government overstepped the legal boundaries in dealing with the Bundestag.

And, he says, when the votes took place there was a political consensus that something had to be done to avert grave consequences, and that lawmakers did indeed have enough time to examine the drafts.

'The bailout will not collapse'

European legal expert Ingolf Pernice, who accompanied the representatives of the European Central Bank to the hearing, is convinced that the Greek bailout and the permanent eurozone bailout fund will be ruled as constitutional, at least in principle.

But, he says, the court may add stipulations for dealing with future requests that could complicate the eurozone's bailout plans. "There are bound to be quite a few clauses aimed at ensuring that, in the future, the government will not be in a position to take action without prior authorization by the Bundestag," said Pernice.

Christian Calliess, a colleague of Pernice's from Berlin's Free University, also predicts the court will demand more in-depth participation by the German Bundestag rather than topple the multibillion euro safety net.

Plaintiffs have argued that the bailouts break the no-bailout clause in the European Union's treaty, which says neither the EU nor member states should take on other governments' liabilities.

But despite that argument, Calliess doesn't think the euro bailout efforts will be overturned, not even in the European Court of Justice.

"You have to ask yourself whether a norm should be allowed to lead to the collapse of the euro, and maybe even the European Union as a whole," he said.

Commitment to future rescue plans

In a worst-case scenario, declaring the eurozone bailout as unconstitutional would spell the end to the eurozone's safety mechanism and would have far-reaching consequences, said the Green's Sarrazin.

However, Pernice believes nothing much would change because Germany would still have to fulfill its existing international obligations. He says these responsibilities couldn't be cancelled, even if the court ruled the bailout unconstitutional, though it would be terrible for the financial markets and the future of the euro.

"International accords must be honored, no matter what," said Pernice.

Author: Daphne Gratwohl / db
Editor: Nancy Isenson, Martin Kuebler