Euro bailouts legal, MPs need more say: German court

7th September 2011, Comments 0 comments

Germany's top court ruled on Wednesday that aid for Greece and rescues for other eurozone countries is legal but said parliament must have greater say in any future bailouts.

In a landmark ruling anxiously anticipated on jittery financial markets, the Constitutional Court in Karlsruhe, western Germany, said all "large-scale" future aid packages must be approved by the parliament's budget committee.

"The federal government is required to seek the approval of the parliament's budgetary committee before handing over guarantees," chief justice Andreas Vosskuhle said, reading out the judgement.

The euro initially spiked against the dollar on the foreign exchange markets as traders showed relief that the court had not slapped down the rescue packages, which could have ramped up the eurozone debt crisis several notches.

The verdict comes weeks before the German parliament votes on extending the EFSF rescue fund amid mounting scepticism both from politicians and from the public, with Merkel facing a rebellion from within her own centre-right coalition.

The ruling also comes at a time of high political tension in Europe's other major economies over the debt crisis, with governments struggling to get deep reform and austerity measures through parliament.

In Spain, thousands marched on Tuesday against a plan to enshrine balanced budgets in the constitution -- following Germany's example -- and demanding that the issue be put to a referendum.

The Italian government has put forward new austerity measures and called for a confidence vote in parliament, allowing the Senate to vote on Wednesday on the 45.5-billion-euro ($64.0-billion) plan.

French deputies are also in the process of debating strict austerity measures.

The court also ruled that parliament must have "sufficient influence" over the conditions attached to future rescue deals, likely limiting Chancellor Angela Merkel's room for manoeuvre if new crises blow up.

And it may not approve deals that could lead to an unforeseeable burden on future parliaments.

Moreover, the judges insisted that parliament may not approve any deal that leads to a pooling of national debt, apparently ruling out the idea of "eurobonds."

Economists are concerned that requiring parliamentary approval for future rescue deals may slow down the process of helping debt-wracked eurozone nations, where rapid decisions to stem swift market moves are often required.

However, Christian Waldhoff, an expert for constitutional law at the University of Bonn, told Phoenix television: "The rights of the German parliament have been strengthened but without tying the hands of the German government on the European stage."

The court was ruling on a case brought by six eurosceptics, who argued that the bailout of Greece in May 2010 and subsequent setting-up of the eurozone bailout fund, the EFSF, broke EU and German constitutional law.

The judges threw out their argument that the rescue package removed parliament's budgetary room for manoeuvre and ability to debate future budgets.

In Berlin, several deputies have indicated they might abstain or vote against the bill extending the euro's rescue fund when it comes up for vote, probably on September 29.

The boosting of the effective lending capacity of the EFSF from 250 billion euros to 440 billion euros means that German guarantees will rise from 123 billion to around 211 billion euros.

Merkel is assured of a majority as the opposition Social Democrats and Greens have both said they will back the bill, but it would be a humiliating defeat for the chancellor, already weakened by poor regional election results.

The exact wording of the bill, including the extent of parliament's involvement in future bailouts, had been left until the court handed down its ruling.

© 2011 AFP

0 Comments To This Article