GERMAN FINANCE minister Wolfgang Schäuble has defended last year’s rescue initiatives for Greece and Ireland as justified and necessary to prevent financial market contagion spreading to other euro zone states.
At an oral hearing yesterday in Karlsruhe, Germany’s constitutional court warned it would not examine the economic details of the euro zone bailouts, but only their legal footing.
“Europe’s future and the right economic strategy to tackle the sovereign debt crisis aren’t to be debated in Karlsruhe. That’s the task of politicians, not judges,” said presiding judge Andreas Vosskuhle, head of the eight-judge panel. “The federal constitutional court must consider the limits that the constitution sets on the political realm.”
Some 50 bailout complaints were filed with the Karlsruhe court last year, three of which were chosen as sample cases.
Berlin has defended Germany’s contribution to the rescue measures under examination, saying €22.4 billion ad hoc help for Greece and the €147.6 billion to the European Financial Stability Facility that expires in 2013 are of a limited nature.
“The danger of contagion was the justification of the need to help Greece in April 2010 with co-ordinated bilateral loans,” said Mr Schäuble. “No measures to stabilise the euro zone are taken in Germany without the approval of parliament.”
Complainants argue that the parliament was railroaded into backing bailouts which could prove a greater danger for the single currency than Greece’s economic difficulties.
“To save the euro by destroying the fundamental norms of currency regulation is like trying to clear up water damage by blowing up the house,” said Prof Dietrich Murswiek, representing Bavarian MP Peter Gauweiler. “In reality the rescue funds serve to remove risk from certain large banks.”
As Karlsruhe has no jurisdiction over European affairs, bailout complaints have been framed as a breach of German parliamentary and budgetary law. The judges pursued a critical line of questioning, suggesting they had doubts about the admissibility of cases before them.
At issue for the court is not whether the bailouts breach the “no-bailout” provisions of the European treaties, but whether these bailouts have brought a clear, provable disadvantage to German citizens and are a breach of the constitution.
Several of the judges asked the complainants to spell out exactly the breaches of law they saw caused by the bailouts.
“Legally speaking, this may seem like small potatoes,” said judge Udo di Fabio, “but particularly in this case one has to take particular care”.
Economics professor Karl Albrecht Schachtschneider, one of the complainants, argued: “What is wrong economically cannot be right legally.”
Legal watchers suggested that the court is unlikely to strike out the bailouts but, as with its 2009 Lisbon Treaty verdict, will call for greater Bundestag involvement in such rescues.
This would influence autumn talks between the Bundestag and the federal government over legislation to frame the permanent rescue mechanism, scheduled to operate from 2013. A verdict is expect in September.