Markus Schreiber, Photo
KARLSRUHE, Germany — Germany's high court on Wednesday upheld the country's participation in last year's bailout of Greece and the eurozone rescue fund, but ruled that a budget committee had to vet any future decisions to commit any more taxpayer money.
The ruling means Germany's agreement to take part in the financial rescue of Greece remains in force, which is crucial because the country is the biggest contributor of loan guarantees. But it could also make it harder for the government to muster support at home for future emergency measures to fight the debt crisis.
The Federal Constitutional Court rejected lawsuits arguing that Germany's participation had violated parliament's right to control spending of taxpayer money. But 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 government is obligated in the cases of large expenditures to get the approval of the parliamentary budgetary committee," Vosskuhle said.
The ruling had been closely watched by financial markets in case the bailouts were rejected or more severe restrictions were placed on the government's ability to fund bailouts, such as required approval by the full parliament. But the court did neither.
Instead, it required governments to consult only the committee before committing substantial funds. The current bailout law allows the government to consult the budget committee after the fact in some cases.
Chancellor Angela Merkel greeted the ruling favorably, telling parliament that 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," Merkel said.
In an impassioned defense of the 17-nation euro, she told lawmakers that the euro meant more to Europe than just a common monetary zone, saying that 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."
But while indebted eurozone governments might be relieved that the court upheld Germany's bailout participation, analysts noted parliamentary consultation will only make it harder to put together future rescues.
"Its insistence that the German parliament must be more heavily involved in future bailouts suggests that further support will be hard to muster," Jennifer McKeown at Capital Economics.
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.
In a rushed vote, Germany's parliament agreed to join in the May 2010 bailout of Greece to keep it from defaulting on its debts, and to back the €440 billion ($620 billion) European Financial Stability Facility with some €147 billion ($207 billion) in loan guarantees.
The suits were filed by conservative legislator Peter Gauweiler and a group of professors who challenged the bailout. They argued that parliament's budgetary rights were undermined by the country'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 21 summit, giving it the right to buy the bonds of financially weak governments, help recapitalize banks, and quickly loan money to countries before they get into a full-blown debt crisis.
But the changes have run into hurdles. Approval by national parliaments was delayed by August vacations. Finland has demanded collateral from Greece for its contribution, leading to more negotiations, while a junior governing party in Slovakia says no vote can be held until December.
The slow approval process has left the European Central Bank as the only backstop against the crisis spreading to Italy and Spain. The bank has been buying the bonds of both countries to keep market interest rates from soaring and pushing them into financial disaster, a job it expects the EFSF to take over as soon as possible.
David Rising and Kirsten Grieshaber in Berlin, and Angela Charlton in Paris contributed to this report.
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