Global Politics

German Court Rejects 'Euroskeptic' Bailout Lawsuit

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Germany's Constitutional Court rejected a challenge to the country bailing out other nations in the eurozone. (Photo: BBC)

Germany's Constitutional Court rejected challenges to that country's participation in the financial bailouts of other Eurozone nations. Chancellor Angela Merkel welcomed the decision.

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As the leader of Europe's biggest economy, Merkel has taken the lead on efforts to contain the continent's debt crisis.

The German court's decision effectively gave the go-ahead to Germany's participation in the EU's ongoing, multi-billion dollar Greek bailout plan.

But Chief Justice Andreas Vosskuhle advised a close reading of the ruling.

"The tenor of this decision is extremely tight," said Vosskuhle. "It should not be misinterpreted as a 'blank check' for more rescue packages."

Last year, Germany ponied up nearly a quarter of the initial bailout money for Greece – more than $100 billion.

But now, if any other European country needs a bailout in the future, the German parliament will have to approve the country's expenditures.

David Marsh, the author of a book on the Euro called "The Battle for the New Global Currency," says the German decision will make life difficult for other countries that might seek bailouts.

But outside pressure, he says, may be what holds the currency union together going forward.

"It's not the end of the Euro, because you see the Chinese government, and the Japanese central bank, and all sorts of finance ministries all over the world, particularly in Asia; want the Euro to continue as an alternative to the dollar," Marsh said.

They don't want to be left alone with the outrageous irresponsibility of the US system. So, they badly need an alternative.

For its part, the European Union has talked a lot of late about making the financial union even stronger, of further centralizing monetary and fiscal policy. The Euro's not just a currency, they say, but a strong symbol of political union as well.

Roger Bootle, managing director of Capital Economics in London, calls the Eurozone "monetary union lite."

Further centralization might work, Bootle says, but says the words of politicians are cheap.

"What really matters is the economic and financial fundamentals," Bootle said. "I think the UK, and much of the world, would be better placed if the Euro were to break up. Indeed, it's the only way I can the European economy moving forward onto a new growth path. Out with all of it. And start afresh."

Breaking up, though, is hard to do given the amount of time and energy that went into creating the Eurozone. One way or the other, some say the United States should be paying close attention.

Frederic Mishkin teaches at Columbia Business School in New York. He says that the crisis in Europe could be what tips a stagnant US economy and jobs market into full blown recession.

"The potential biggest problem for the US economy is what's going on in Europe," Mishkin said. "And it's not clear whether they can solve this problem … and if the financial and banking system blows up in Europe, then we have a much, much bigger problem."

Meanwhile, Italy and Spain – two more nations that many say are on the verge of needing bailouts – are still trying to get their financial houses in order.

Spanish senators are trying to approve a measure that would cap future budget deficits. Italy is trying to push through new austerity measures.

In both nations, the moves have drawn angry protests on the streets.