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German Court Gives Parliament More Say in Bailouts

Reuters
Tuesday, 28 Feb 2012 | 6:14 AM ET

Germany's top court said on Tuesday a parliamentary committee set up to approve urgent action by the euro zone bailout fund was "in large part" unconstitutional, in a ruling that may hamper Berlin's ability to tackle Europe's debt crisis.

Reichstag Parliment building, Berlin, Germany
Martin Child | Photodisc | Getty Images
Reichstag Parliment building, Berlin, Germany

The Constitutional Court verdict means that either a full session of the 620-strong Bundestag (lower house of parliament) or its 41-member budget committee will have to be convened every time a decision has to be made on the use of the bailout fund.

The special panel of nine MPs will only be allowed to approve the purchase of debt on the secondary bond market by the fund - a facility that has not been used anyway.

It cannot approve loans or preventative credit lines for troubled euro member states like Greece or the capitalisation of banks.

The red-robed president of the court, Andreas Vosskuhle, cited the need to guarantee "as much parliamentary legitimisation as possible" as a reason for upholding a complaint by two opposition MPs that the panel infringed the basic right of lawmakers to decide on budgetary matters.

"The smaller the size of the committee, the less representative it is," said fellow judge Peter Huber.

German Finance Minister Wolfgang Schaeuble had urged the court to leave intact the powers of the special parliamentary panel, warning that the ability of the EFSF bailout fund to respond to the crisis with the requisite speed may be harmed.

The ruling will not have any impact on Monday's decision by the Bundestag to approve a second, 130-billion-euro ($174-billion) bailout package for Greece.

But it was apparent in that vote that MPs, like the German public, are tiring of having to foot a large share of the bill for bailing out the likes of Greece, Portugal and Ireland, and object to their powers over such budget-related issues being curtailed.

Taxpayers

"I think that in terms of atmosphere it's not good when the population think there is a small panel that can make enormous decisions that the taxpayer will later have to pay for," said economic policy professor Manfred Neumann from Bonn University.

Norbert Lammert, the speaker of the Bundestag who is from Chancellor Angela Merkel's ruling Christian Democratic Union (CDU) but is also a strong defender of parliamentary control, welcomed the ruling as "logical and convincing".

With Merkel's ability to pass legislation on the euro crisis increasingly at risk - 17 MPs from her centre-right coalition rebelled against the Greek package on Monday, up from 13 who defied her in a vote on the bailouts last September - the panel would have given her room for manoeuvre.

It was set up to take urgent decisions on behalf of the powerful Bundestag budget committee when it comes to especially urgent or confidential matters.

Tuesday's ruling will apply not only to the current temporary bailout fund, the European Financial Stability Facility (EFSF), but also to its permanent successor, the European Stability Mechanism (ESM), according to a constitutional court official.

While there is growing resistance among German voters to further bailout spending, pressure is also mounting on Berlin from the world's leading economies to drop opposition to boosting the ESM in order to free up more international help.

Former German chancellor Helmut Kohl, one of the architects of the euro, warned in the popular daily Bild that Germany was in danger of "losing sight of the goal of a united Europe".

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