German top court to rule on ESM, this time for good

(BERLIN) - Germany's highest court will Tuesday make its final ruling on the legality under national law of the European bailout fund, the ESM, having earlier backed it in principle.

Throughout the eurozone turmoil since 2010, the Constitutional Court has repeatedly been asked by eurosceptics to rule on whether new EU crisis-fighting tools are in line with Germany's constitution.

The red-robed judges have always validated European decisions, or sent them to a European court, while reinforcing the German parliament's right to be consulted and informed.

This time the focus will be on the European Stability Mechanism (ESM), set up to bail out troubled countries and their banks, with a maximum lending capacity of 500 billion euros ($696 billion), guaranteed by the member states.

Germany's share of these guarantees amounted to 190 billion euros, more than that of any other country. Germany was one of the last countries in the region to ratify the ESM, in late 2012.

The German judges, in a preliminary ruling in September 2012, saw no obstacles to Germany taking part in the mechanism, a decision that was met with relief throughout Europe.

As a result, President Joachim Gauck was able to sign Germany's participation in the crisis-fighting tool into law.

However, the court in the western city of Karlsruhe imposed some conditions, including consultation with the lower house of the German parliament.

The treaty establishing the ESM contained an annex detailing these provisions.

The German judges -- whom Chancellor Angela Merkel has always had to take into account in her decisions on European policy -- will now make their final verdict on the legality of the ESM.

There has been no suggestion they will deviate from the line they have taken so far.

In a ruling last month, the German court for the first time passed a matter up to the European level, the Luxembourg-based European Court of Justice (ECJ).

At issue was the European Central Bank's OMT bond purchase programme, which eurosceptics had argued overstepped the central bank's mandate and was tantamount to printing money.

The Outright Monetary Transactions programme theoretically allows the bank to buy up unlimited amounts of sovereign debt of crisis-ridden countries.

It was unveiled by ECB chief Mario Draghi in August 2012 and, although it has never been put into use, its mere existence largely defused fears of an imminent eurozone break-up.

Observers said the decision could be good for the euro because the ECJ as a European body was unlikely to overturn an anti-crisis measure that has been instrumental in restoring calm to the markets.

The EU Commission in Brussels welcomed the German court's move.