German court to start hearing case against euro bailouts

By Annika Breidthardt

KARLSRUHE, Germany (Reuters) - Bailouts of Europe's debt-stricken countries face a legal challenge on Tuesday as Germany's top court begins hearing a lawsuit against German contributions to the rescues of Greece, Ireland and Portugal.

The Karlsruhe-based Constitutional Court is not likely to block the German government's participation in bailouts altogether, or force the government to withdraw its commitments to current rescue plans, legal experts say.

But most experts, including government sources, say they expect the court to impose conditions making it harder for the government to provide fresh aid. For example, parliament's lower house may be given a bigger say in approving future bailouts.

"For the first time in economic history, a currency is going on trial," Joachim Starbatty, one of the plaintiffs and an academic who has strongly criticized the introduction of the euro, said in Monday's Berliner Morgenpost newspaper.

The court will hear cases brought by six euroskeptic plaintiffs including Peter Gauweiler, a lawmaker from the Christian Social Union, the Bavarian sister party to Chancellor Angela Merkel's conservatives.

They argue that the bailouts violate property rights and other protections in the German and European constitutions, and break the European Union's 'no-bailout clause', which says neither the EU nor member states should take on governments' liabilities.

Together with the International Monetary Fund, the EU has since last year approved bailout packages for Greece, Ireland and Portugal totaling 273 billion euros ($395 billion). A second bailout of Greece is under discussion after the first turned out to be insufficient.

In a sign of how seriously the German government is taking the lawsuit, Finance Minister Wolfgang Schaeuble is to attend Tuesday's court session, which starts at 0800 GMT (4 a.m. EDT).

The first hearing will be closely watched as experts have in the past been able to gauge the outcome of cases from the kinds of questions the judges asked early on. It is not known how long the court will take to reach a verdict.

(Reporting by Annika Breidthardt, additional reporting by Kalina Oroschakoff; Editing by Jon Boyle and Andrew Torchia)