Germany rejects eurozone bailout challenge

The judge said that parliament may not approve any deal that leads to a pooling of national debt [Reuters]

Germany’s top court has ruled that aid for Greece and rescue packages for other eurozone countries was legal but said parliament must have greater say in any future bailout deals.

The Constitutional Court, based in Karlsruhe, western Germany, was responding to a challenge brought by six leading German Eurosceptics.

The five academics and one politician argued that the bailouts violated property rights and broke the “no bailout” clause in the European Union’s treaty.

In a landmark ruling, eagerly anticipated by jittery financial markets, the court said all “large-scale” future aid packages must be approved by the parliament’s budget committee.

Reading out Wednesday’s judgement, Chief Justice Andreas Vosskuhle said: “The federal government is required to seek the approval of the parliament’s budgetary committee before handing over guarantees.”

In addition, the court ruled that parliament must have “sufficient influence” over the conditions attached to future rescue deals, likely limiting Angela Merkel’s, the German chancellor, room for manoeuvre if new crises occur.

The court said that parliament may not approve deals that could lead to an unforeseeable burden on future parliaments.

The judges also said that parliament may not approve any deal that leads to a pooling of national debt, apparently ruling out the idea of “eurobonds”.

Economists fear that requiring parliamentary assent for future rescue deals may slow down the process of helping debt-wracked eurozone nations, where rapid decisions to stem swift market moves are often required.