German court expected to dismiss bailout challenge
Plaintiffs claim Merkel acted illegally in rescuing indebted states
EUROPE will find out at around 9am today whether the German government acted legally when it moved to rescue the Greek and Irish economies last year.
The ruling could have a long-term effect on the Irish economy even if the court throws out the challenges as most observers expect.
Germany's constitutional court in Karlsruhe is scheduled to issue a ruling on last year's bailout packages after several legal challenges to them.
While anxiously anticipated by lawmakers and scholars, investors believe the judges are likely to rubber-stamp German participation in the bailouts.
The verdict will be the final answer to three separate legal actions by politicians, economists and lawyers.
In a press conference earlier this week, the plaintiffs made their agenda clear by calling for Ireland, Greece and other indebted nations to be thrown out of the European Union.
One of the plantiffs, economics professor Wilhelm Noelling, said that the euro could only be "made functional by limiting it to a maximum of seven strong countries".
Experts do not see the court going as far as blocking euro aid but they do expect it to rule that parliament should be given more of a say in future bailouts; something many German politicians are also insisting on before they vote on the European Financial Stability Facility (EFSF) in the lower house at the end of the month.
Chancellor Angela Merkel faces a revolt by some members of parliament from her own centre-right coalition on granting extra powers for the EFSF -- though she says she is confident of getting her own majority and not relying on the support of opposition MPs.
Another academic plaintiff, Joachim Starbatty, said exiting the eurozone was the only way Greece and other indebted euro states could revalue their currency and gain competitiveness. Without that, the end of the eurozone was near.
"It'll go on for two more years, then it's game over," Mr Starbatty told reporters.
While the courts may make it more difficult for Germany to organise future bailouts, few people expect a ruling that would reverse the current bailouts.
"I don't know anybody who marked calendars red for Wednesday," lawyer Kai Schaffelhuber told Bloomberg yesterday. "You could argue history has already moved on, so that the court is ruling about one of yesterday's chapters in the euro-drama."
Mrs Merkel pledged last week to consult parliament as much as it felt necessary as her cabinet agreed on a reworked EFSF that will raise Germany's share of EFSF loan guarantees to €211bn from €123bn.
Draft legislation introduced to the Bundestag yesterday gives parliament the right to decide how it participates in EFSF operations while leaving room to incorporate any guidelines handed down by the court.
The court will rule on the technical issue of whether constitutional constraints have been kept and not on whether the rescue is economically sound.
When the judges rejected emergency bids last year seeking to halt German payouts, they sent a message about the final ruling.
"They positioned themselves that way and it's unlikely they will now say all of it was unconstitutional," Mr Schaffelhuber said.