Newspaper article International Herald Tribune

Finance Chief in Germany Asks Court to Back Bailout ; Minister Argues Delay in Euro Measures May Harm Weaker Countries

Newspaper article International Herald Tribune

Finance Chief in Germany Asks Court to Back Bailout ; Minister Argues Delay in Euro Measures May Harm Weaker Countries

Article excerpt

Top official tells judges that euro currency union depends on his nation's commitment to the bailout fund and fiscal integration.

The German finance minister, Wolfgang Schauble, warned on Tuesday of severe consequences for the euro currency union if his country's highest court blocked Germany's recent ratification of two main European measures for fighting the region's financial crisis.

Even if the court, as widely expected, eventually approves Germany's commitment to the measures, legal analysts do not expect a ruling for several months. That could prolong the market anxieties that plague vulnerable euro zone countries like Spain and Italy.

"A considerable delay could result in additional, significant uncertainty in euro zone markets," Mr. Schauble told an eight-judge panel of the Federal Constitutional Court at a hearing in the southwestern city of Karlsruhe.

It was a rare appearance before the high court by the German finance minister, who was invited by the judges, and it underscored their awareness of the importance their decision would have beyond Germany.

At issue is Germany's commitment of up to EUR 22 billion, or $27 billion, in direct payments, and of guarantees for an additional EUR 168 billion into Europe's permanent bailout fund, known as the European Stability Mechanism. The other measure before the court is Germany's backing of a separate pact to reduce budget deficits and increase coordination of government spending rules that 25 of the 27 European Union nations signed in March.

The case before the constitutional court underscores the struggle in adopting long-term solutions to the euro zone's problems, as even Germany -- the country whose leaders have been the strongest advocates for "more Europe" -- continues to face domestic opposition to a deeper fiscal and political union for the region. At the core of the debate are questions about how much money richer nations are to give out, and how much political sovereignty all of the currency union's members would be expected to give up.

Even measures already approved by the bloc involve their own forms of delay. For example, in Brussels on Tuesday, European lenders to Greece indicated that based on their recent review of how well Athens was living up to its bailout commitments, they would not be ready to approve the next allowance payment before September.

In Germany, opponents of the two treaties that Mr. Schauble defended on Tuesday, and which passed the country's Parliament on June 29 by a clear two-thirds majority, argue that the treaties' terms violate the German Constitution. Opponents include a member of Chancellor Angela Merkel's own center-right coalition, as well as lawmakers from the opposition Left Party and other groups of disgruntled citizens.

But Germany is hardly alone in facing domestic opposition to European-integration measures that its leaders support.

Increasingly, Dutch and Finnish voters also rankle at the idea that their tax contributions are being spent across wider Europe, while many in France take issue with the limits that European integration would place on how their government sets tax policy.

Many analysts and economists say that without the measures drawn up and agreed to in principle by European leaders over the past months, weaker individual countries will continue to remain at the mercy of financial market speculators and continue to labor under high borrowing costs even as they try to revive their economies. For such thinkers, it is a variation of "united we stand, divided we fall."

"The fundamental problem with the euro zone is that what happens at the federal level in the United States still happens at the national level in the euro zone," said Philip Whyte, a senior research fellow at the Center for European Reform in Europe. …

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