21st Nov 2017

Germany's top court to decide on Greek bailout

Germany’s highest court is on Wednesday (7 September) due to give its verdict on the legality of Berlin's contribution to both Greece's first bailout and the eurozone rescue fund.

Earlier statements by judges involved in the case suggest the court is unlikely to declare Germany's steps to secure the eurozone illegal but will demand that the parliament has more say – similar to a recent ruling it handed down on the EU's Lisbon Treaty.

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The central issue is whether the court believes the budget rights of the German parliament have been undermined by the huge sums involved, and the extent to which it can make guarantees for amounts that account for a substantial part of the country's budget.

Constitutional court president Andreas Vosskuhle at the case hearing on 5 July spoke about whether "precautionary measures" need to be introduced to maintain the budget sovereignty of the Bundestag.

He also said the case was about whether an "absolute limit" for the size of the loans should be set and whether parliament should have the right to approve each payout to troubled euro countries.

Udo Di Fabio, another court judge, at the July hearing said that budgetary power represents the "crown jewels" of parliament.

The legal challenge was brought by centre-right MP Peter Gauweiler and a group of academics. They argue that Berlin’s actions last year breach both the country's constitution and EU law.

"It violates the basis rules of the European treaties and the structural principles of monetary union - namely the ban taken on the liabilities of other states," said one of the plaintiffs, law professor Karl Schachtschneider, in July.

Germany, as Europe's paymaster, pays most of the €110 billion EU-IMF Greek bailout agreed last year and has the greatest national share of the €750 billion rescue fund established to prevent the crisis from spreading further.

The country's participation in the first Greek bailout and in the subsequent bailouts to Ireland and Portugal as well as a second aid package to Athens, agreed in July, has proved deeply unpopular.

The political debate has centred on a feeling that the EU is moving towards being a transfer union that will be propped up by Germany.

But Vosskuhle was careful to point out that the court is not deciding on economic policy but on a question of law.

"The future of Europe and the right economic strategy aren't being debated in Karlsruhe," he said. "That is up to the politicians, not the judiciary."

The ruling comes at a sensitive time in Germany's debate on eurozone politics.

The parliament is on 29 September due to decide whether to approve a July deal by EU leaders to make the bailout fund more flexible.

Political parties have already indicated that they want parliament to approve the purchase of government bonds and to have a veto over whether to grant new aid to a country.

The court's judges are well aware of the impact of the ruling ahead of the parliament vote. According to Spiegel Online, Vosskuhle last week said the date was "partly accidental, partly intentional".

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