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Europe

German court hears case against bailouts

Text by News Wires

Latest update : 2011-07-05

Germany’s constitutional court has begun to hear legal challenges by six eurosceptic plaintiffs to the country’s role in two euro zone bailouts last year. The case comes just as a further EU bailout to Greece has been agreed.

REUTERS - Germany’s top court began hearing legal challenges on Tuesday against the country’s role in last year’s bailouts of debt-stricken euro zone peers, just as a second Greek rescue is being drawn up.

The Karlsruhe-based Federal Constitutional Court is unlikely to block Berlin’s participation in bailouts altogether, but legal experts expect it will probably set conditions for passing fresh aid for euro zone countries.

Finance Minister Wolfgang Schaeuble, defending the government, attended in person to tell the court that Europe had to act in 2010 to prevent contagion from struggling countries to the rest of the currency union.

“The danger of such contagion ... justified the need to help Greece in April 2010 with coordinated bilateral loans,” he said.

Germany is the bloc’s economic powerhouse and foots over a quarter of Europe’s bill for the bailouts. Many Germans are becoming fed up with financing rescues of what they see as profligate states that have spent beyond their means.

Presiding judge Andreas Vosskuhle said the court would not review the economics behind policies to tackle the euro zone’s sovereign debt crisis but focus only on the legal basis.

“Europe’s future and the right economic strategy to tackle the sovereign debt crisis aren’t debated in Karlsruhe. That’s the task of politicians, not judges,” Vosskuhle said. “But the Federal Constitutional Court must consider the limits that the constitution sets on the political realm.”

One of the plaintiffs, Karl Albrecht Schachtschneider, argued: “What is wrong economically cannot be right legally.”

The court is considering three lawsuits brought by six eurosceptical plaintiffs—five academics and a lawmaker from Chancellor Angela Merkel’s Bavarian sister party—against euro zone bailouts and aid paid to Greece, Ireland and Portugal.

Most experts and government sources say they expect the court to give parliament a bigger say in approving future bailouts, potentially tying the government’s hands.

The hearing is being closely watched in Germany and the rest of the EU as in the past legal experts have been able to gauge the likely outcome of cases early on from the kinds of questions the judges asked. A verdict is expected in the autumn.

The pending case has also given Merkel a strong reason to take a tough line in euro zone negotiations, another reason why it is being observed with trepidation in European capitals.

Like blowing up a building

The plaintiffs argue that multi-billion euro aid packages for Greece and other euro zone strugglers are incompatible with EU treaties and could end up turning the EU into a financial “transfer union » from richer to poorer states.

EU leaders officially back Greek aid package

“Rescuing the euro by destroying the fundamental norms of the currency’s constitution is like repairing water damage by blowing up the building," said Dietrich Murswiek, lawyer for one of the plaintiffs, Peter Gauweiler of the Christian Social Union, a conservative Bavarian party in Merkel’s coalition.

Together with the International Monetary Fund, the EU has since last year approved bailout packages for Greece, Ireland and Portugal totalling 273 billion euros ($395 billion). A second bailout of Greece is under discussion after the first one turned out to be insufficient.

Ahead of the hearing, Schaeuble said the government was certain that Germany’s decision to commit to rescue funds "was necessary and right" and a means of safeguarding the euro.

“I cannot see that it violated the constitution in any way,” he told reporters.
Schachtschneider said before the hearing the euro had failed and he hoped the court would reject a system “that will lead not just to economic disaster, but also to political instability for Germany and all of Europe”.

The head of Germany’s Ifo research institute, Hans-Werner Sinn, also warned of dire consequences for Germany if bailout payments to debt-choked euro zone countries continued.

“The euro safety net threatens Germany’s financial stability. We are at the start of a long chain of aid payments that Germany will have to make to crisis-hit countries, » Sinn told the online edition of the top-selling daily Bild.

Asked whether Germany would have more room to cut taxes to boost the coalition’s popularity if it had not aided Greece, finance minister Schaeuble said the link was tenuous.

“Without a common European currency we would be in a much worse situation and we would not have ... less than 3 million unemployed but more than 5 million unemployed,” he said.

“We are not just defending European unity and the common market and common currency, but the wealth and social security of its people, » Schaeuble told reporters in Karlsruhe.
 

Date created : 2011-07-05

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