Germany’s judiciary, Bundestag, and Bundesbank launched raised serious questions about the viability of Germany’s continued leadership in providing legal and financial support of bailouts to struggling EU nations.  Chancellor Angela Merkel is in the difficult position of keeping Germany as a leader of the EU in its greatest crisis, while at the same time addressing dissent at home.  Time is of the essence, as the coming weeks will determine the likely fate of the European currency and Germany’s role as a leader holding the currency together.  Germany’s role is essential, as it contributes over 25% of bailout funds.

First, Germany’s Federal Constitutional Court is currently reviewing the legality of the EU’s latest bailout package which amounts to nearly half a trillion Euros.  The question for the court is whether the latest bailout violates German fiscal sovereignty or Treaty law.  Experts on the situation forecast that the bailout will survive legal scrutiny, but the court will admonish the government for not going through the Bundestag.

Adding to the Chancellor’s headaches, twenty-three members of Chancellor Angela Merkel’s own party announced their intention to vote against the bailout package.  While the bill is likely to pass, the Chancellor may have to use opposition support.  Such a loss of support from the Chancellor’s own party calls into doubt the stability the government.

Finally, one of Germany’s financial institutions, the Bundesbank issued a statement criticizing the European Central Bank’s bond purchases and said that the “EU is drifting towards debt union without democratic legitimacy or treaty backing.”  Furthermore, the Bundestag is debating a bill allowing the European Financial Stability Facility more capital as well as the power to recapitalize banks.  The bill is scheduled for a vote at the end of September.  Analysts believe up to another €2 trillion is needed to stop the contagion that is spreading through Spain and Italy.

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