German Court Rejects Rescue Challenge

Top court says government needs parliamentary approval for bailout payments.

Challenges to Germany’s participation in the euro rescue funds were rejected by the nation’s top court today, which said the government must seek some parliamentary approval for any future bailout payments.

The Federal Constitutional Court in Karlsruhe threw out suits targeting Germany’s share of the 110 billion-euros ($155 billion) in loans for Greece from euro-region governments and the International Monetary Fund as well as a separate 750 billion-euro rescue fund approved last year to halt the spread of Greece’s debt crisis.

The ruling will aid German Chancellor Angela Merkel’s efforts to gain support for participation in a new round of European Financial Stability Facility programs. She pledged last week to consult lawmakers as her Cabinet agreed on a reworked plan that will raise Germany’s share of EFSF loan guarantees to 211 billion euros from 123 billion euros.

“This gives a green light for continued bailouts which is the only track available to euro-zone leaders right now,” Fredrik Erixon, head of the European Centre for International Political Economy in Brussels, said in a telephone interview.

The court said the ruling shouldn’t be seen as “blanket” approval for rescue participation and the government must seek approval from the parliament’s budget committee for guarantees it assumes under the EFSF.

‘Elementary Budgetary Decisions’
“Parliamentary decisions about taxing and spending are a central element of democratic self government under the constitution,” Andreas Vosskuhl, president of the court said in the ruling. “As representatives of the people, the elected members of parliament thus also need to remain in control over elementary budgetary decisions.”

Politicians applauded the ruling, with Deputy Foreign Minister Werner Hoyer saying it was a “good day for the stability of the euro.”

The euro extended gains after the ruling. It was up 0.4 percent at $1.4050 as of 11:46 a.m. in Berlin.

“The government already adheres to the requirements to seek approval from the budget committee for new payouts under the rescue fund,” German Deputy Finance Minister Steffen Kampeter said in the courtroom after the ruling. “The government got full backing from the court.”

Plaintiffs in the suit included law professor Karl Schachtschneider, economists Joachim Starbatty, Wilhelm Hankel and Wilhelm Noelling, former Thyssen AG Chief Executive Officer Dieter Spethmann and Peter Gauweiler, a lawmaker from the Bavarian sister party of Merkel’s Christian Democrats.

'Historic Responsibility’
“The court bears the historic responsibility for the destruction of the euro -- and even more so: for the destruction of the EU,” said Schachtschneider. “The ruling is a blow especially for the poor in Germany as the court declines to protect the value of our money, which will hit the poor most.”

They argued German participation in the rescue packages undermines the budgetary rights of parliament and violates the right to democratic representation as well as the protection of property.

The plaintiffs have unsuccessfully turned to the court before in an attempt to block German participation in EU treaties, including the introduction of the common currency.

The cases are BVerfG, 2 BvR 987/10, 2 BvR 1099/10 and 2 BvR 1485/10.

Bloomberg News

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