EU rescue complaints heard by top German court

5th July 2011, Comments 0 comments

The German Constitutional Court opened new hearings on Tuesday on complaints against loans to Greece and other eurozone countries in a move that might affect a future European Union rescue fund.

Crucial payments from the EU's economic powerhouse are nonetheless likely to keep flowing however, in line with arguments by Finance Minister Wolfgang Schaeuble, who testified in person before the tribunal.

Although the country's highest court is unlikely seriously to curtail the government's room for manoeuvre amid the eurozone debt crisis, it could weigh in on terms of a permanent fund, the European Stability Mechanism (ESM).

Given popular discontent in Germany against eurozone bail-outs, others within the 17-nation bloc will follow the proceedings closely to determine how much leeway Chancellor Angela Merkel has to commit to future EU rescue plans.

Lawmakers within the Bundestag, or lower house of parliament, including within Merkel's conservative coalition, have become outspoken opponants of additional aid.

Some claim that rescue measures already taken violate no bailout terms of the EU's Maastricht Treaty or parts of the German Constitution.

Commerzbank analyst Eckart Tuchtfeld said the court could take issue with the fact that loan guarantees committed future budgets and therefore restricted the parliament's budgetary rights.

Peter Gauweiler, a conservative deputy who is one of the plaintiffs, claimed that EU rescue plans and the mooted ESM constituted "a de-facto abrogation of (the parliament's) budget sovereignty."

The court's ruling is thus expected to weigh the legality of German participation in the ESM, a permanent rescue fund designed to replace the current European Financial Stability Facility (EFSF) in mid 2013.

German judges might require changes such as a systematic parliamentary vote on requests for ESM funds, a condition which is not formally the case at present.

Joachim Starbatty, a university professor who was one of the first to file a complaint with the court, summed up his position by saying: "We find ourselves on a path we cannot see the end of, and we want to know if this is the right path."

The court in Karlsruhe, southwestern Germany, is hearing appeals against the government's decision to contribute to rescues for debt-laden Greece last year and the EFSF, which was established two weeks later.

The government's decision committed Germany to guaranteeing loans of up to 22.4 billion euros ($32.4 billion) for Greece and more than 200 billion euros for Ireland and Portugal.

In May 2010, the court rejected a request by four German jurists and a German businessman for an injunction against payment of the German aid.

The new ruling is to deal with the matter in greater debth and is expected only in a few months, but questions raised by the court early on should indicate the issues it considers most pertinent.

In the light of its earlier verdicts, "it seems very unlikely that the court will force Germany to withdraw its commitment to the current rescue facilities," Citigroup Global Markets economist Juergen Michels commented.

Finance Minister Wolfgang Schaeuble argued in a statement to the court that Berlin had to stand alongside eurozone partners, saying "a common currency cannot make it without solidarity among its members."

He added that "no significant measure to stabilise the eurozone has been taken without the parliament's support."

Schaeuble, a jurist by training, also noted that EU treaties allowed member countries to provide "mutual support" in times of trouble.

© 2011 AFP

0 Comments To This Article