German court rules Greece bail-out legal

Daniel Mason, Public Service Europe, 07.09.2011

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Germany's highest court has ruled that the country's participation in the Greek bail-out was legal but warned that the approval of parliament must be won before any further financial assistance is granted to eurozone members.

In a widely predicted result, the Constitutional Court rejected the challenge of six German eurosceptics who claimed that the €110bn bail-out of Greece was illegal. Chancellor Angela Merkel said the decision vindicated her government and that the rescue package had been essential because, "If the euro collapses, Europe collapses". [...]

Reacting to the decision, Janis Emmanouilidis, senior policy analyst at the European Policy Centre, and Fabian Zuleeg, its chief economist, said any relief the ruling brought to markets would be brief, and nor did it mean the eurozone was out of trouble despite giving the government "broad economic and political room for manoeuvre".

They wrote that problems still ahead included, "Finnish demands for collateral, a potential delay or even 'no' from the Slovak parliament to the July package, dissenting voices in the German coalition fuelled by bad election results for both coalition parties, worries about the political and economic commitment to austerity and reform measures in Greece and/or Italy, as well as fears about the potential for a double-dip global recession".

And while the ruling allows the EU "to move on" and for the rescue programmes to go ahead, it "will not be enough," they write. "Either the eurozone moves towards a fully-functioning economic and monetary Union or one crisis will follow the other until maintaining the common currency becomes untenable."

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