The week that could make or break the eurozone

Looming decisions could put the single currency back on track – or speed its ruin

Berlin

Europe stands on the threshold of a series of dramatic make-or-break decisions this week that will determine whether the eurozone can finally move towards resolving its long-running economic crisis or shift alarmingly towards the abyss of European disintegration.

Tomorrow judges at Germany's constitutional court will decide if a hotly contested permanent rescue fund can be set up to help bail out ailing eurozone countries. A No verdict or even restrictive conditions could cause chaos on the markets and signal the beginning of a possible demise of the euro.

Their ruling will be followed by a general election in the Netherlands. The result could hand power to the Eurosceptic Labour party of Emile Roemer, which is riding on a wave of popular frustration over Europe. Such an outcome could sow disarray within Europe and seriously undermine the EU's strategy for helping ailing eurozone countries.

Tomorrow also sees the formal announcement of the European Commission's plans for a banking union. On Friday eurozone finance ministers will hold a key meeting to discuss the way forward for debt-ridden Spain and Italy. As a commentator for Germany's Der Spiegel magazine put it yesterday: "This is the week that could make or break the common currency."

But the euro agenda does not end there: today the Greek Prime Minister Antonis Samaras meets the European Central Bank chief Mario Draghi to address Athens' demands for a bailout extension.

Their encounter follows a pessimistic assessment yesterday from the so-called "Troika" of inspectors from the International Monetary Fund, European Central Bank and European Commission on Greece's progress towards making the €12bn worth of spending cuts needed to qualify for its next massive tranche of bailout funding.

But the biggest decision of the week will unfold inside a nondescript concrete and glass building in the German city of Karlsruhe, which happens to be the seat of the country's powerful constitutional court. A panel of crimson-robed judges will assemble in the morning to rule whether the backing given by Chancellor Angela Merkel's government last year for a permanent €500bn European bailout fund known as the European Stability Mechanism (ESM) is legal or breaches Germany's constitution.

Reflecting widespread public opposition in Germany to the idea of taxpayers being legally obliged to pump their earnings into a fund designed to permanently bail out its ailing European neighbours, the ESM proposal is being challenged by 3,700 plaintiffs. It is the largest number of opponents to a piece of legislation the constitutional court has ever experienced.

German anger over eurozone funding already reached boiling point last week with the announcement by Mr Draghi detailing the bank's plans to buy up unlimited amounts of eurozone government bonds to help ailing countries overcome high interest rates.

Germany's Bundesbank said the measure was "close to state financing via the printing press". At the weekend Peter Gauweiler, a Eurosceptic politician, issued a direct challenge linking the ECB measure and ratification of the ESM. He insisted in a constitutional court appeal that the judges should not approve the ESM until the ECB had rescinded its bond-buying plan.

The constitutional court's job has been made even harder by widespread claims in the German media that by deciding on such key issues, the court is straying dangerously away from purely legal matters into uncharted and hitherto impermissible "political" decision making.

Ominously the court's ruling was also preceded by dire warnings from the respected international financier, George Soros. He told a group of leading German bankers on Sunday night that it was time for Germany to "lead or leave the eurozone".

A fierce critic of Angela Merkel, Mr Soros said Europe should target 5 per cent growth. He argued that Germany should drop its insistence on austerity and become a more "benevolent leading country" or leave the eurozone. "Either alternative would be better than the present course," he said.

Despite the pessimism, most politicians in Germany remain confident that the constitutional court will rule in favour of the ESM. Dutch Europhiles were also able to breathe at least a sigh of temporary relief yesterday after opinion polls suggested that Holland's pro-EU centre parties were on course for a narrow victory. The ruling Liberal party was shown to be leading the Eurosceptic Labour by one per cent in a survey conducted at the weekend.

Victory for the Dutch Labour party would be particularly galling for Chancellor Merkel's government because it would undermine its commitment to eurozone austerity. If the Dutch polls prove correct, then the election is likely to result in a coalition of Liberals and Labour taking power. Dutch voters have warmed to the EU in recent days with the public welcoming the recent ECB bond-buying decision.

But even if the Karlsruhe court and Holland swing in the euro's favour, a big question mark will still hang over Greece. The country's three ruling coalition partners remain at loggerheads over a critical €12bn saving programme that the government has to implement to qualify for more bailout funding.

The three parties will convene again tomorrow in an attempt to hammer out a decision. But inspectors from the Troika have rated Athens' ability to tackle endemic problems of tax evasion as "uncertain".

The Greek government may yet be able to obtain some unexpected support from Germany – the country many Greeks hold accountable for their current financial misery. Der Spiegel reported at the weekend that Ms Merkel had taken a major policy U-turn and decided it was crucial to ensure that Greece remained in the eurozone at least until after Germany's September 2013 general election.

The 'ESM': what it will do

"ESM" stands for European Stability Mechanism, a body which will manage a permanent European bailout fund of about €500bn. It will also have a say in the fiscal policy of member states, and has been called the European version of the International Monetary Fund. It was devised to replace the European Financial Stability Facility, a temporary fund set up in the early days of the euro crisis. It was due to start in July, but critics in Germany argued it breached the country's constitution.

Critical week crunch time for the euro

Today: After a bruising meeting with inspectors from the European Commission, the European Central Bank and the International Monetary Fund, Greek Prime Minister Antonis Samaras heads to Frankfurt to try to convince ECB President Mario Draghi, right, of his plans to make nearly €12bn in budget cuts to secure the release of €31bn in bailout cash. But he's facing pressure from the inspectors to make deeper cuts to the civil service.

Tomorrow: Crunch day for the eurozone, with Germany's constitutional court due to rule on the legality of the European Stability Mechanism, which some opponents say hands too much control to Brussels. Eyes are also on elections in the Netherlands, seen as a bellwether for opinion in the rest of Europe. There will be jitters if the Eurosceptics perform well. Meanwhile, in Strasbourg, EU Commission President José Manuel Barroso is expected to lay out plans for a banking union for the eurozone.

Friday: After a packed week, finance and economic ministers from eurozone nations will hold an informal meeting in Nicosia, where they are expected to discuss if any more measures need to be put in place to protect Spain and Italy from further turmoil.

Spain is also under pressure to formally ask for rescue funds from Europe this week, which would trigger the European Central Bank's facility for buying the country's bonds in unlimited quantities. The only scheduled announcement from Madrid, however, is a review of the nation's troubled banks.

News
news

Emergency call 'started off dumb, but got pretty serious'

Sport
Erik Lamela celebrates his goal
football

Argentinian scored 'rabona' wonder goal for Tottenham in Europa League – see it here

News
The cartoon produced by Bruce MacKinnon for the Halifax Chronicle-Herald on Thursday, showing the bronze soldiers of the war memorial in Ottawa welcoming Corporal Cirillo into their midst
news
News
peopleFox presenter gives her less than favourable view of women in politics
PROMOTED VIDEO
News
ebooksAn unforgettable anthology of contemporary reportage
Voices
Funds raised from the sale of poppies help the members of the armed forces with financial difficulties
voicesLindsey German: The best way of protecting soldiers is to stop sending them into disastrous conflicts
News
The Edge and his wife, Morleigh Steinberg, at the Academy Awards in 2014
peopleGuitarist faces protests over plan to build mansions in Malibu
Property
One bedroom terraced house for sale, Richmond Avenue, Islington, London N1. On with Winkworths for £275,000.
property
Voices
Nigel Farage has backed DJ Mike Read's new Ukip song
voicesNigel Farage: Where is the Left’s outrage over the sexual abuse of girls in the North of England?
News
i100
Arts and Entertainment
Taylor Swift performs at the 2014 iHeart Radio Music Festival
musicReview: 1989's songs attempt to encapsulate dramatic emotional change in a few striking lines
News
Mario Balotelli has been accused of 'threateningly' telling a woman to stop photographing his Ferrari
peoplePolice investigate claim Balotelli acted 'threateningly' towards a woman photographing his Ferrari
Arts and Entertainment
Paul Anderson plays Arthur Shelby in Peaky Blinders series two
tvReview: Arthur Shelby Jr seems to be losing his mind as his younger brother lets him run riot in London
Voices
Don’t try this at home: DIY has now fallen out of favour
voicesNick Harding, who never did know his awl from his elbow, is glad to see the back of it
Arts and Entertainment
Miranda Hart has called time on her award-winning BBC sitcom, Miranda
tv
Sport
Phil Jones (left) attempts to stop the progress of West Bromwich Albion’s James Morrison on Monday
Chelsea test can be the making of Jones and Rojo, writes Paul Scholes
Arts and Entertainment
Saw point: Bradley Cooper and Jennifer Lawrence in ‘Serena’
filmReview: Serena is a strangely dour and downbeat affair
Life and Style
The Zinger Double Down King, which is a bun-less burger released in Korea
food + drinkKFC unveils breadless meat beast
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

English Teacher

£4848 - £33600 per annum: Randstad Education Manchester Secondary: Outstanding...

Cover Supervisors/Teaching Assistants Secondary Schools in York

Negotiable: Randstad Education Leeds: Cover Supervisors/Long Term Teaching Ass...

Science Teacher

£20000 - £30000 per annum: Randstad Education Leeds: Secondary Science Teacher...

Cover Supervisor

£55 - £70 per day: Randstad Education Leeds: Cover Supervisors needed for seco...

Day In a Page

Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

Wilko Johnson, now the bad news

Former Dr Feelgood splits with manager after police investigate assault claims
Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

Mark Udall: The Democrat Senator with a fight on his hands

The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
New discoveries show more contact between far-flung prehistoric humans than had been thought

New discoveries show more contact between far-flung prehistoric humans than had been thought

Evidence found of contact between Easter Islanders and South America
Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

Cerys Matthews on Dylan Thomas

The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
DIY is not fun and we've finally realised this as a nation

Homebase closures: 'DIY is not fun'

Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

Air New Zealand's wizard in-flight video

The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

Pumpkin spice is the flavour of the month

The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
11 best sonic skincare brushes

11 best sonic skincare brushes

Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

Paul Scholes column

I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

While other sports are stalked by corruption, we are an easy target for the critics
Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

A crime that reveals London's dark heart

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

Lost in translation: Western monikers

Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

Handy hacks that make life easier

New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

KidZania: It's a small world

The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker