German court opens door to euro rescue
Date September 13, 2012
Chief justice Andreas Vosskuhle (centre) reads the verdict in the Federal Constitiutional Court in Karlsruhe, Germany. Photo: Getty Images
A CONSTITUTIONAL crisis for Germany and a financial shock to the euro have been averted by a court decision that will allow Germany to contribute to Europe's permanent euro bail-out fund.
The German Supreme Court last night ruled that it was legal under the constitution for Germany to participate in the bail-out but imposed conditions, including a limit of €190 billion.
The Federal Constitutional Court in Karlsruhe dismissed motions filed by such groups as a conservative lawmaker and an opposition political party - which tried to block the fund, known as the European Stability Mechanism - and a deficit-control treaty championed by Chancellor Angela Merkel.
''The review has concluded that the laws that were challenged, with high probability, do not violate the constitution,'' chief justice Andreas Vosskuhle told the court in comments broadcast live.
''Hence the motions for a temporary injunction were to be rejected.''
But ''some uncertainties'' about the limit on Germany's contribution to the ESM and the scope of the German parliament's say over the fund also flowed into the ruling, he said.
The legal challenge to the planned rescue fund highlights bailout fatigue in Europe's largest economy, and delayed efforts by Dr Merkel and the other policymakers to stem the region's debt crisis.
In the neighbouring Netherlands, Prime Minister Mark Rutte, a Merkel ally, was seeking re-election overnight.
The Dutch city of Maastricht gave its name to the European Union treaty that created the euro, but the country has fallen out of love with the single currency, with eurozone austerity starting to bite and taxpayers being asked to fund the bailouts for indebted southern European countries.
Opinion polls put radical eurosceptic parties in third and fourth place in elections that were expected to rob Dr Merkel of a key ally as the Netherlands swings to the left, away from Berlin's doctrine of fiscal discipline and towards French President Francois Hollande's support for reduced austerity.
Mark Rutte, the Dutch centre-right Prime Minister, was neck and neck in the polls with Diederik Samsom's centre-left Labour Party, with many commentators predicting the biggest swing to the left in Holland's history.
Before the vote, Mr Rutte warned voters that such a swing would damage the ''Hague-Berlin'' axis.
It would also jeopardise the country's close economic relationship with Germany.
''If another party wins, there is the threat of a Hague-Paris axis emerging,'' he said. ''And France is the country of high state debt, high taxes and low economic growth.'' Mr Rutte is allied to Dr Merkel, while Mr Samsom's calls for a spending stimulus have linked him to Mr Hollande, threatening to tilt the political balance further against eurozone austerity measures.
As the eurozone economic crisis and budget cuts hit the Dutch hard, eurosceptic parties on both sides of the spectrum were predicted to make historic gains as up to 40 per cent of voters remain undecided.
