German court challenge over EU bail-outs Published duration 5 July 2011

German anxiety about the billions of euros the EU is lending to keep ailing eurozone economies afloat is not just a political issue - some even argue that the bail-outs are illegal.

On Tuesday the German Constitutional Court will start examining a number of judicial complaints against the bail-outs, as Greece negotiates a new lifeline worth about 120bn euros (£108bn; $174bn).

The BBC's Stephen Evans in Berlin examines what is at stake for Germany - Europe's biggest eurozone lender.

Is Germany Europe's ATM? Is it the great money machine that doles out banknotes to the irresponsible and profligate who cannot keep their own finances in order?

Or is it Europe's great debtor nation? Is it a country which has repeatedly been bailed out by others - but which now forgets its own indebtedness, as it urges others to get a grip on their finances?

These two starkly opposing views are on display as German taxpayers contemplate a second bail-out of Greece.

media caption Professor Markus Kerber told the BBC's Stephen Evans why he believes bail-outs are illegal

On the one hand, a German economics professor has gone to his country's highest court to argue that the bail-outs of Greece, the Republic of Ireland and Portugal breached the German constitution. If he wins - a verdict is expected in about three months - they will be blocked.

Professor Markus Kerber told the BBC the bail-outs were illegal because sound finance is written into the German constitution: "We are not free to enter into a system of inflation".

He sees the German constitution, written in the ruins of war and inflation, as a great guarantor of financial stability by forbidding governments from spending beyond their means. It gave the power of spending to the German parliament - and not to the European Central Bank, the European Commission or the International Monetary Fund.

"There is a written constitutional rule saying that if ever monetary policy and monetary sovereignty is transferred, it can only be transferred on condition that the same stability rules are respected".

And that means the German parliament has the final say: "By transferring to so-called Euro-rescue umbrellas very, very important powers and decisions, the German parliament no longer has a real say in the matter. They are confronted by decisions which have been taken".

So speaks one deeply opposed to the bail-out of Greece.

How Germany recovered

image caption German Constitutional Court judges are examining whether the bail-outs violate German sovereignty

Contrast his view with those of Professor Albrecht Ritschl, a German economic historian at the London School of Economics: "Germany is king when it comes to debt".

So when Germany lectures Greece about its economy, he says, "you're sitting in a glass house, so don't be arrogant about it".

Prof Ritschl argues that Germany has repeatedly defaulted on debt, not just in the 1930s but since World War II too.

In the 1930s, he told the BBC, the United States reduced German debts to practically nothing.

And after World War II reparations to the victorious Allies were forgotten until the unification of the two halves of Germany, 20 years ago. But then, Prof Ritschl says, Chancellor Kohl simply said that full reparations would be impossible. The Western powers did not press the matter.

Why does this history lesson matter now? Prof Ritschl argues that Germany is trying to do to Greece precisely what its creditors did not do to it. They took the view that squeezing Germany would have been damaging. Instead, they decided that financing the rebuilding was wiser.

He is heartened that there is now some talk in Germany of a "Marshall Plan for Greece" - the idea that a constructive plan of repairing a damaged economy might work for Greece, just as it did for Germany.

Deep pockets?

That view is more popular than you might think. According to Peter Matuschek, a pollster with the Forsa polling organisation, about half the population is opposed to aid for Greece - and half is for it.

The polling figures show that about 60% of those asked value being in the eurozone - and realise that this may mean Germany has to help.

Prof Kerber is not among that 60%. If he wins in court there will be an earthquake. There would be a constitutional crisis, because a central policy of the government would have been ruled unconstitutional.