Court rules eurozone rescue legal, but MPs to vet funds

Germany’s high court has upheld the country’s participation in emergency measures to fight the eurozone debt crisis, but ruled that a parliamentary committee had to vet future plans to commit taxpayers’ money – potentially slowing decision-making in a fast-moving situation.

The court yesterday said Germany’s agreement last year to take part in Greece’s financial rescue and to set up a eurozone crisis fund was legal. The country is the biggest contributor of loan guarantees to troubled nations such as Greece.

But it also said parliament had the right to decide how taxpayers’ money was spent and the government could not commit to more emergency expenses without asking the Bundestag’s budget committee first.

That means new bailouts could take more time to be agreed and the rescue fund, the European Financial Stability Facility, could be slower to use its new powers.

Eurozone governments have agreed to let the fund buy government bonds of shaky countries or lend money to governments before they get into a full-blown crisis. But to stay ahead of market developments, it needs to be able to act quickly.

The decision by the Federal Constitutional Court had been closely watched in case the bailouts were rejected outright as illegal. However, attention lay mostly on what restrictions the court would place on the government’s future ability to fund eurozone rescue measures.

Court president Judge Andreas Vosskuhle said parliament had to play an active role and could not simply serve as a rubber-stamp for the chancellor.

The court did not impose, as some feared, the harsher requirement that emergency packages be approved by the full parliament.

Instead, it took a middle path, requiring the government to consult only the parliamentary committee before committing substantial new funds. The current bailout law allows the government to consult the budget committee after the fact in some cases.

The ruling was a minor victory for chancellor Angela Merkel, who told parliament the judges had “absolutely confirmed” her government’s policies.

“The Federal Constitutional Court said personal responsibility and solidarity, naturally with the absolute approval of the parliament, is the way,” she said.

In an impassioned defence of the euro, she told MPs it meant more to Europe than just a common monetary zone, saying no countries with a shared currency had ever gone to war with one another.

“The euro is the guarantor of a unified Europe,” she said. “If the euro collapses, Europe collapses.”

The bailouts are unpopular in Germany, where they are seen as endangering the country’s more solid finances to help less responsible governments out of trouble they caused themselves.

The suits ruled on yesterday were filed by conservative MP Peter Gauweiler and a group of professors. They argued that parliament’s budgetary rights were undermined by Germany’s participation in the bailout packages, among several other arguments rejected by the court.

European leaders agreed to increase the bailout fund’s flexibility at a July summit.

But Finland has demanded collateral from Greece for its contribution, leading to more negotiations.