By Martin Banks - 6th September 2011
The court will almost certainly approve the bail-outs
Open Europe
The German constitutional court is expected to rule on Wednesday on the legality of the eurozone bailouts.
The keenly-anticipated verdict follows several challenges against the rescue packages of Greece, Ireland and Portugal in addition to complaints against the ECB's bond buying programme.
The court is widely expected to approve the bailouts, fearing that any other decision would spell disaster for the euro.
However, the court could also demand more influence for the German parliament and lay down additional constitutional red lines – possibly including restrictions on joint debt liabilities in the eurozone – in return for approving the bailouts.
Any such limits would complicate any move towards a fiscal union in the eurozone, something ALDE leader Guy Verhoftstadt and others called for on Monday.
The UK- based think tank Open Europe says that injecting more parliamentary democracy into the eurozone crisis is "clearly a good thing" but warns that "it will also further limit EU leaders' room for manoeuvre when dealing with the economic crisis, which in turn could increase market uncertainty".
"Unfortunately for the ECB under such a scenario it would once again be forced to pick up the responsibility of lender if last resort," said Open Europe's director Mats Persson.
He added, "The court will almost certainly approve the bail-outs, possibly citing as a reason that monetary stability is a legally protected interest.
"However, the court is also susceptible to public opinion and, in order to guard its reputation, could well demand more influence for the German parliament."
The head of Open Europe's Brussels office, Pieter Cleppe, added, "Although the court will almost certainly approve the bailouts, it may well demand a greater say for the German parliament over the bailout funds, and could even lay down some additional constitutional red lines on joint debt in the eurozone.
"This could further complicate attempts to push the eurozone towards fiscal union, including the widely discussed pooling of debt and risk through Eurobonds."
"More parliamentary democracy is clearly a good thing, but a stronger say for the Bundestag over the bailouts will also further limit EU leaders' room for manoeuvre when dealing with the crisis, which in turn could increase market uncertainty.
"Unfortunately for the ECB, under such a scenario it would once again be forced to pick up the responsibility of lender of last resort, as the EFSF will be too inflexible and unresponsive to play that role."
