Germany's top court is to rule Wednesday on a slew
of constitutional challenges to pivotal parts of Europe's plan for
rescuing the eurozone, in a landmark decision that could decide the
fate of the euro.
Based in the sleepy west German town of Karlsruhe, the Federal
Constitutional Court has been wading through more than 37,000
objections to the enactment of Europe's fiscal compact on budget
discipline and the creation of a new 700-billion-euro
(895-billion-dollar) bailout fund, the European Stability Mechanism
(ESM).
A decision by the court's eight judges to block Europe's plans
could have devastating consequences for the region, sending markets
into turmoil and plunging the eurozone even deeper into crisis.
It would also represent a major blow to Chancellor Angela Merkel,
who has been the chief architect of the austerity drive that is
enshrined in the fiscal pact.
The court's deliberations have already resulted in a delay to
launching the ESM, which had originally been due to come into
operation in July. Germany is the major contributor to the ESM, so
the nation's backing is needed if the new bailout fund is to finally
come into force.
That means Wednesday could end up representing a major turning
point in Europe's battle to bring the long-running debt crisis to an
end.
The court's ruling coincides with elections in the Netherlands,
which are likely to be a major test of the bailout fatigue in
northern Europe.
Up until now, the Netherlands has also been a key ally in Merkel's
campaign to place fiscal austerity at the centre of Europe's drive to
tackle high deficit-and-debt levels.
Also on Wednesday, Brussels plans to set out more details of a new
banking union to help beef up the supervision of banks in the
17-member eurozone.
A decision by the German court to strike down the objections would
also help to build on the momentum from last week's announcement by
the European Central Bank of an unlimited bond-buying programme.
This was aimed at strengthening Europe's attempts to deal with the
crisis by heading off investor speculation in eurozone bond markets.
Legal experts, along with members of Germany's political
establishment and financial markets, are confident that the court
will give the green light to Europe's rescue plan, which has already
been approved overwhelmingly by the nation's parliament.
"This week, the twin threat posed by Wednesday's German ESM vote
and (the) Dutch election has receded with benign outcomes for both
anticipated," said ING Bank foreign exchange analyst Tom Levinson.
But underscoring the opposition in parts of Germany to the ECB's
bond-buying programme and the euro rescue plan, a lawmaker in
Chancellor Angela Merkel's government has lodged a last-minute
objection with the court regarding the Frankfurt-based bank move.
The objection submitted by Peter Gauweiler has raised concerns
that the court might be forced to delay its ruling on the ESM and the
fiscal compact.
Overseen by court president Andreas Vosskuhle, the court plans to
issue a statement Tuesday on "how it would proceed" with Gauweiler's
objection.
German critics believe both the powers for the ESM and the fiscal
compact infringe upon the parliament's constitutional right to decide
on budget questions and could leave the nation exposed to unlimited
liabilities.
But, said European law expert Christian Calliess in a study
prepared for Germany's Bertelsmann foundation: "The ESM is solidly
based on democratic and legal aspects."
Those lodging objections include: Germany's taxpayers'
association; former justice minister Herta Daeubler-Gmelin; legal
expert Karl Albrecht Schachtschneider; the nation's hard left Linke
party; and a lobby group called Europe Needs More Democracy
representing thousands of Germans.
As was the case with the ECB's deliberation on the bond-buying
plan, the German government has been careful not to be seen as
seeking to influence the court during its considerations of the
objections to the ESM and fiscal compact.
This was despite Germany's central bank, the Bundesbank,
spearheading opposition to the ECB move.
But, in an interview with the weekly Frankfurter Allegemeine
Zeitung am Sonntag, shortly after he was named president of the court
in March 2010, Vosskuhle laid out how he saw the bank's role.
"Don't worry, the Federal Constitutional Court is not another
Bundesbank," Vosskuhle told the newspaper.
