Courts limit Germany's ability to react to debt crisis

Reuters , Wednesday 7 Sep 2011

Germany's high court rejects lawsuit to block euro bailout packages but must meet the approval of parliament's budget committee

Germany's highest court said on Wednesday that parliament must have a bigger say in eurozone rescue packages, in a landmark ruling that may make it more difficult for Europe to respond swiftly in delivering aid to crisis-hit member states.

The German Constitutional Court rejected a series of lawsuits filed by Eurosceptics aimed at blocking the participation of Europe's biggest economy in bailout packages for Greece and other eurozone countries, as had been expected.

But it said the government must seek the approval of parliament's budget committee before granting aid and spelled out that the ruling should not be misinterpreted as a "blank cheque" for future rescue packages.

"The constitutional complaint has been rejected," said the president of the court, Andreas Vosskuhle, in a ruling closely watched by policymakers and investors because of its impact on the decision-making process in the 17-nation currency bloc.

Greece, Portugal and Ireland have already received aid from Europe and the International Monetary Fund while Italy -- the third largest economy in the eurozone - looks increasingly vulnerable as it struggles to implement a savings programme.

The prospect of having urgent rescue decisions bogged down in legislation in Germany - and potentially other eurozone parliaments, if more states follow suit - will not please policymakers trying to streamline the process.

Chancellor Angela Merkel already faces a revolt in the Bundestag (lower house of parliament) over European leaders' decision in July to grant new powers and extra funds to the current bailout fund - the European Financial Stability Facility (EFSF) - which goes to a vote on 29 September.

Parliament also has to ratify by the end of the year the fund which will replace the EFSF from mid-2013 -- the European Stability Mechanism (ESM) - and the court ruling is likely to influence how it allocates rescue funds in future too.


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