Germany's top court will likely rule next week that Berlin broke no laws by contributing to euro zone bailouts but parliament should get a bigger say in them from now, potentially limiting the bloc's ability to react swiftly in future crises.
The Karlsruhe-based Federal Constitutional Court will deliver its ruling on Wednesday September 7 from 0800 GMT. The closely-watched verdict comes at a time when many in the Bundestag lower house of parliament, including Chancellor Angela Merkel's own coalition, are concerned they are being bypassed in Germany's costly decisions in the euro crisis.
But investors fear the court could set new hurdles, slowing down the currency zone's response with legislative processes that could set a precedent for other capitals or even blocking German aid altogether, though this is thought highly unlikely.
"Widespread market fears that the Constitutional Court might possibly demand the reversal of crisis management decisions taken at the European level are probably largely unfounded," said Deutsche Bank economist Barbara Boettcher. "The focus is likely to be on the rights of the Bundestag to have a say in these matters, particularly with regard to budget responsibility," she added.
The court is considering three lawsuits brought by six eurosceptic plaintiffs - five academics and a lawmaker from the Bavarian sister part to Merkel's conservatives - against aid for Greece, Ireland and Portugal paid out since last year. They argue that multi-billion euro aid packages violate German law, as well as European treaties, and could turn the EU into a "transfer union", where rich states like Germany finance the fiscal indiscretions of poorer members like Greece.
In the 1990s, the five academics tried, and failed, to have the Constitutional Court stop the introduction of the euro. The court will likely say parliament's key right to decide on budget issues has been violated and demand it gets more input than merely signing off on a bigger, more powerful European Financial Stability Facility (EFSF). Christian Calliess, a law professor at Berlin's Free University, believes the court will insist the Bundestag's role is not "just a one-off approval of the rescue mechanism but also influence on the payment of individual tranches and the conditions attached to them".
"That puts the onus on the government to convince the Bundestag," Calliess said, adding that this would help counter the impression held by some lawmakers in Merkel's coalition that there is what they call a "democratic deficit" in euro policy.
It is unclear at this point how detailed the verdict will be. It could range from setting just a basic outline to a very detailed decision and legal experts say either option is possible. Euro zone leaders agreed last month to boost the effective size of the European Financial Stability Facility (EFSF) to 440 billion euros and give it extra powers, including a potential role in helping to recapitalise banks.
That decision increases Germany's share of guarantees to up to 211 billion euros from a previous 123 billion - about two thirds of the annual federal budget. The Bundestag will vote on the changes on September 29, when Merkel must face down a threatened revolt in her own parliamentary bloc. Germany is Europe's economic powerhouse but many Germans are fed up with footing the bill for helping what they see as states that spend beyond their means - a sentiment that may intensify now that German economic growth is slowing down.
Two thirds of Germans surveyed in a poll think parliament should not ratify more money for the EFSF. The German court also has the option of passing a decision on one or all of the points in the lawsuits to the European Court of Justice, but experts consider that unlikely.