German court seen confirming euro bailout scheme is legal
BERLIN, March 18
BERLIN, March 18 (Reuters) - Germany's Constitutional Court is expected to confirm on Tuesday that it considers the euro zone bailout fund legal so long as parliament has sufficient oversight.
Finance Minister Wolfgang Schaeuble has said he is "totally confident" that the 700 billion euro ($975 billion) European Stability Mechanism won't be ruled unlawful. Experts consider it unlikely the court will contradict its own preliminary ruling.
The Karlsruhe court's initial finding in 2012, at the height of the debt crisis, was that the bailout scheme complied with German law provided the Bundestag lower house had powers to veto it and could ensure limited liability for German taxpayers.
Gunnar Beck, a Eurosceptic law expert at London University, said the verdict 10 a.m. (0900 GMT) might contain hints about the legality of the euro zone's flagship anti-crisis measure - the European Central Bank's bond-buying programme called Outright Monetary Transactions (OMT).
The court in Karlsruhe took the unprecedented decision last month to defer a ruling on the legality of the OMT - credited with saving the euro zone - to the European Court of Justice.
Beck said there would be less interest in court "caveats" about the ESM "than what, if anything, the court might say or imply about the ECB's OMT".
But economist Christian Schulz at Berenberg bank said the court was "definitely not going to say anything new on OMT".
The Luxembourg-based ECJ is seen as less of a threat to the OMT, which was announced by ECB chief Mario Draghi in 2012 and helped to keep the euro zone together by promising potentially unlimited purchases of the sovereign bonds of member states.
The German court could still give its own verdict after an ECJ ruling, which is likely to take over a year. It has said there was reason to think the OMT exceeded the ECB's mandate and violated a ban on the ECB funding governments.
Beck said that if the ESM ruling restates that Germany's ESM liability must not exceed 190 billion euros, it "might reinforce its assessment that the OMT is unlawful because it entails further budgetary risks for Germany".
But Schulz said this would not cause much concern because if Germany and its partners commit 500 billion euros in total to the ESM, "that's enough for the small countries - and for the big countries the ESM is never going to be enough".
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