Court in Karlsruhe is expected to announce whether Germany's participation in a permanent bailout fund is in line with the country's constitution
Germany's supreme court has long enjoyed a reputation that it is good for surprises. But its eight judges will never have felt their capacity for creating so much drama as in the run-up to a ruling they are due to deliver on Wednesday, and which could decide the future of the euro and even influence the world economy.
The court in Karlsruhe is expected to announce whether Germany's participation in a permanent European bailout fund is in line with the country's constitution, a decision that has Angela Merkel's government on tenterhooks.
If the court rules in favour of the European Stability Mechanism (ESM) and the fiscal pact on countries' budget limits, then debt-ridden countries like Spain and Greece will be able to be kept afloat as part of Europe's blueprint for tackling debt contagion in the eurozone.
If the court rules against the plan, Europe may find itself in turmoil, with markets likely to react with panic to a decision that would have the potential to topple the single currency.
A late legal challenge by a conservative member of the German parliament was rejected by the court on Tuesday, ensuring that the judges would stick to their original plan to deliver their long-awaited verdict on the bailout.
But most analysts agree that the judges, not wishing to go down in history as the court that brought down the German government, and the euro and plunged the world economy into gloom, are likely vote in favour of the bailout mechanism.
"I don't think the court will strike down the ESM, because it wouldn't like to be seen to be killing off the euro. Just as the German government doesn't have the courage to do that, neither does the court. If it ruled that the government had adopted a wrong decision, it would cause a huge crisis of legitimacy in Germany," said Gunnar Beck, an EU law expert at the School of Oriental and African Studies in London. "Never in the 60-year history of the court has there been an example of the court killing an essential piece of government policy."
What he and other analysts believe, though, is that the court will choose a "middle way" – allowing the ESM to go ahead but not without insisting on tight limits and conditions that would affect the Bundestag's decision-making procedures on future aid and further European integration.
The court's decision not to accept the last-minute appeal by the eurosceptic MP Peter Gauweiler made a positive ruling more likely, analysts said. Gauweiler, who has plenty of allies within the government, had argued that Germany should not agree to the ESM until the European Central Bank reversed its bond-buying plan announced last week, which critics say will stoke inflation and offers no incentive for debt-ridden countries to reform. Gauweiler might still refile his challenge following the rejection.
The case was brought by 37,000 petitioners, including academics, ordinary Germans, and members of Merkel's own party. Their main concern is that their taxes are being used to prop up parts of Europe they view as irresponsibly profligate.
All eyes are on the constitutional court president, Andreas Vosskühle, who will deliver the historical verdict at 10am local time on Wednesday. Vosskühle, a quietly spoken 48-year-old lover of abstract art who eschews the limelight, is believed to support the growing concern in Germany that too much power is being ceded to Brussels. He once said the citizens of Germany "shouldn't one morning wake up and find out that the people they elected have nothing to decide anymore".
Schäuble chastises US borrowing
Not content with taking a hard line with fellow eurozone countries that get too far into debt, Germany's finance minister turned his fire on America's borrowing habit.
In a Bundestag speech to open a debate on the 2013 budget, Wolfgang Schäuble said worries about US debt were a burden for the global economy and questioned how the US would deal with high levels of government debt after the November presidential election – hitting back at Washington's criticism of Europe for failing to get a grip on its own debt crisis.
In private, German officials often express concern about US debt levels and the inability of politicians there to reach a consensus on how to reduce it, but Schäuble's public remarks underscore the extent of the worries in Germany.
"Ahead of the election in the US there is great uncertainty about the course American politics will take in dealing with government debts, which are much too high," Schäuble said.
"We need to remind ourselves of that sometimes and the global economy knows that and is burdened by it."
The issue has become a central theme of the US election campaign with Republican candidate Mitt Romney accusing President Barack Obama of fiscal mismanagement.
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