Business

German court rejects challenge to eurozone bailouts

  • 7 September 2011
  • From the section Business
Media captionBBC's Gavin Hewitt said the bail outs are becoming increasingly unpopular with Germans

Germany's highest court has rejected a challenge to the country bailing out other nations in the eurozone.

The Constitutional Court was responding to a challenge brought by six prominent German Eurosceptics.

But the court did say the government must seek the approval of the German parliament before providing future assistance.

This could further hinder Europe's response to the debt crisis, already criticised as too slow.

German Chancellor Angela Merkel said the high court's decision vindicated her government and said that the existence of the euro meant more than just a common currency.

"The euro is the guarantor of a unified Europe," she told lawmakers. "If the euro collapses, Europe collapses."

'Not blank cheque'

As Europe's largest and most robust economy, the German decision has implications for the whole region.

The presiding judge, Andreas Vosskuhle, said German lawmakers should be more involved in future bailout decisions.

"The government is obligated in the cases of large expenditures to get the approval of the parliamentary budgetary committee," Mr Vosskuhle said.

But it was not a "blank cheque for additional rescue packages," he added.

Since last year, eurozone nations have agreed to support Greece, Portugal and the Republic of Ireland via the European Financial Stability Facility, the fund created to help countries struggling to pay their debt obligations.

Consensus is needed to set up the Europe-wide rescue fund - but with Finland and Slovakia demanding amendments to the deal, there is concern about whether all the member states can come together.

There are still fears that other large countries will also need financial assistance.

Amid heated protests, Spanish senators are meeting to approve a constitutional amendment capping future budget deficits - a measure it hopes will restore the faith of the financial markets in its struggling economy.

Italy, the biggest debtor in Europe, is approaching a confidence vote on its latest austerity package amid much debate on the specifics of the bill.

And French President Nicolas Sarkozy said he remained determined to write a budget-balancing "golden rule" into France's constitution but has not yet decided whether to put the issue to a special parliamentary vote.

Media captionGerman Chancellor Angela Merkel: "If the euro fails, Europe fails"

German political climate

Meanwhile, in an interview with the Bild newspaper, one of the leaders of Germany's ruling coalition did not exclude Greece leaving the 17-member single currency.

"I do not think that can be ruled out but I'm counting on the success of the path that has been taken with aid and consolidation efforts," said Horst Seehofer, chairman of the Christian Social Union and one of three parties in Mrs Merkel's government.

Those comments are in contrast to Mrs Merkel's, who has said there is "no possibility of all" of Greece leaving the euro.

Mrs Merkel's coalition faces some key votes and opinion in Germany remains split over the desirability to bail out other countries in Europe.

The court also ruled out the possibility of pooling the debt of countries in Europe.

This appears to rule out the issuance of so-called eurobonds - common debt that would share risk across the eurozone - which is an idea that has favour in indebted countries but not in Germany.

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