German Constitutional Court and the European Bailout Fund (9/12)     Print Email

UPDATE—This morning the German federal Constitutional court upheld German participation in the European bailout fund. But it did impose the condition that any more money for the 500 billion euro fund will require approval of the German parliament.

At 10 am Wednesday morning in Germany, a panel of eight judges will  issue a ruling on whether the permanent European bailout fund passes constitutional muster in that country.

The case has brought unprecedented international attention to the federal constitutional court (Bundesverfassungsgericht) that sits in  Karlsruhe, hundreds of miles southwest of Germany's political and economic  centers of Berlin, Munich and Hamburg.

Some 37,000 German citizens signed petitions urging the court,  considered the guardian of the country's post-war constitution, to review  whether the operation of the 500 billion dollar European Stability  Mechanism (ESM) impinges on the prerogatives of the parliament. But since the fund was approved by a two-thirds vote, or constitutional majority in  both houses, the widespread expectation is that the court will go along,  said Alexander Privitera, an analyst at the American  Institute for  Contemporary German Studies. A negative ruling would rest on a finding  that the parliament cannot waive its constitutional prerogatives.

In the same conference call with reporters, Jacob Kirkegaard of the  Peterson Institute for International Economics, said in the unlikely event  of a negative court ruling, "there would be a major selloff" on European and  international markets and European leaders would have to go back to the  drawing boards.

Kirkegaard said some media commentary describing the court as  Euro-skeptic is somewhat off the mark He and Privitera said the court has  increasingly become the watchdog of post-war Germany's democratic and de-centralized  institutions and is determined that the parliament play its proper role, especially as more powers transfer from Berlin to Brussels.

In any event, Kirkegaard argued, the parliament will have an effective  veto over any future expansion of the bailout fund because of Germanys 27 percent  share. But the participants noted the parliament is in something of a tricky  position. While two-thirds of its members ratified the fund, some 54 percent  of Germans in a recent poll expressed hope the court would strike it down.

There's been a sharp spike in conservative German criticism of bailouts  since last week's declaration by the European Central Bank to buy Spanish  and Italian bonds to keep the Euro from collapsing.

Jackson Janes, president of the German Studies Institute, predicted a  favorable court decision would bring crowing from Chancellor Angela Merkel  similar to President Obama's reaction when the U.S. Supreme Court upheld his  health care law in June. Janes said it might also bring relief from other  European and international officials who often have expressed irritation  with Merkel's comments about how her options are limited by the German  constitution and its guardian court.

Assuming court approval, the permanent European stability fund could be  operational in a few weeks, replacing and supplementing a temporary 400 billion fund that is largely spent, Privitera said.

The court decision will be one of two potentially decisive events in the  European debt drama. Also on Wednesday, voters in the Netherlands will be  choosing a new parliament after a campaign fought among Euro-skeptic parties  on the left and right, reflecting a rise in those sentiments, and centrist  parties trying to reclaim  majorities, in what had been a traditionally  pro-European electorate until the past two years. The centrist Liberal and  Labor parties have taken a lead in the last pre-election opinion polls.

Michael D. Mosettig, former Foreign Editor of PBS News Hour, is a member of European Affairs Advisory Board.