After years of turmoil, pain and fear, the euro's future may finally be decided be not on the streets of Greece but by a panel of grey judges at the German Constitutional Court
The courtroom is in a drab breezeblock building in a little-known southern German town. The eight judges are all dry legal professors, unfamiliar even within Germany.
And the legal arguments they are being asked to decide are so complex that the coterie of judges have already had a two months extension to be sure of all the technicalities.
Yet on Wednesday this unprepossessing venue will become the most important place in Europe. Germany's Constitutional Court, which sits in the town of Karlsruhe near the border with France, will essentially pass judgement on whether the eurozone has at least a chance to survive.
If they rule that the European Stability Mechanism (ESM) is compliant with the German constitution, then the final hurdle will be overcome in establishing a €700 billion bail-out fund, intended for use to prop up struggling eurozone economies.
If they rule that the ESM breaches the German constitution by handing over too much liability to Brussels, then the fund will be blocked for months or even years. Greece, Spain, and possibly even Italy could plunge into the abyss and depart, dragging with them any remaining hopes of eurozone survival.
The courtroom is in a drab breezeblock building in a little-known southern German town. The eight judges are all dry legal professors, unfamiliar even within Germany.
And the legal arguments they are being asked to decide are so complex that the coterie of judges have already had a two months extension to be sure of all the technicalities.
Yet on Wednesday this unprepossessing venue will become the most important place in Europe. Germany's Constitutional Court, which sits in the town of Karlsruhe near the border with France, will essentially pass judgement on whether the eurozone has at least a chance to survive.
If they rule that the European Stability Mechanism (ESM) is compliant with the German constitution, then the final hurdle will be overcome in establishing a €700 billion bail-out fund, intended for use to prop up struggling eurozone economies.
If they rule that the ESM breaches the German constitution by handing over too much liability to Brussels, then the fund will be blocked for months or even years. Greece, Spain, and possibly even Italy could plunge into the abyss and depart, dragging with them any remaining hopes of eurozone survival.
"It is not an exaggeration to say that this decision is the most important in the court's history," said Michael Efler, campaigner with German pressure group More Democracy, and one of the people petitioning the court.
Nor is it an exaggeration is that Wednesday is a huge day for the euro – a "D Day" for the single currency.
Voters in the Netherlands will chose a new government, and may usher in a previously-unthinkable era of eurosceptic rule in the country.
In Brussels the European Commission will formally issue proposals for a banking union – seen as a vital step to safeguard the single currency, and prevent recurrences of the past years' banking catastrophes.
And in Germany, the thumping financial heart of the eurozone, the Constitutional Court will decide whether the euro can be saved.
The ESM – a permanent replacement for the sticking-plaster European Financial Stability Facility (EFSF) – was due to come into existence in July. All of the 17 eurozone countries except Estonia (which accounts for 0.19 per cent of capital requirements, and thus can be ignored) had ratified the treaty needed to put it into effect. Germany's parliament and senate had approved it. All that was left was for the country's president, Joachim Gauck, to sign on the dotted line, for an extensive bailout fund to be created, intended to end uncertainty about the single currency.
But 37,000 German citizens had other ideas. Academics, Left-wing politicians, eurosceptics and democracy campaigners petitioned the court, claiming that both the ESM and the fiscal pact (allowing the EU to fine countries which overspend) contravened the constitution. They argued that both policies would hand over power to European institutions – requiring a referendum first.
If the court agrees that there is merit to the constituional challenges, President Gauck will be unable to sign the ESM into law - meaning fresh delay, at least, during further court deliberations. The eurozone might not survive the wait.
Politicians in Berlin rarely comment on the workings of the Constitutional Court, but so great is the concern over the outcome that Wolfgang Schaeuble, the finance minister, intervened last week.
"We have examined this carefully and I can't see any problems with our German constitution," he said. "They will not block, I am sure, the treaties of the fiscal compact and the ESM."
Most legal experts do not expect the court to reject the treaties as unconstitutional. But they believe it may demand alterations, potentially watering down the strength of the ESM – although exactly how is unclear.
Petitioners to the court are hoping that the red-hatted judges will throw another spoke in the wheel.
"We are not against the eurozone itself, but the ESM and fiscal compact mark the crossing of a red line," said Mr Efler, the More Democracy campaigner.
"It is totally unacceptable to create a European state through the back door, on technicalities, without a proper debate. We need a referendum on this, before we hand over control of our own budgets to Brussels."
Hans-Olaf Henkel, former president of the German Federation of Industry, said: "If the constitutional court challenges the ESM, then the euro is dead the next day.
"The markets will have a violent reaction, and the euro will not be able to stay intact. And that would be a good thing: the euro has missed all its economic objectives as well as its political objectives.
"Relations within Europe haven't been this bad for 50 years. Yet the 'euromantics' in Brussels now want a centralised state. It is ridiculous."
It all adds up to a very uncomfortable 24 hours for Mrs Merkel, who's convinced that the way to keep the eurozone intact is through austerity, combined with greater political integration.
And there are more clouds on the horizon. In early October the Troika – inspectors from the EU, IMF and ECB – will report on Greece. Their verdict will determine whether the embattled Mediterranean nation receives another tranche of the bailout funds, or is effectively bounced from the euro.
The EU summit that folows soon afterwards promises to be stormy – especially if by then the Dutch has a less compliant government, and French President Francois Hollande distance himself further from his unyielding German counterpart.
Even within Germany, Mrs Merkel faces an uphill battle. The opposition Social Democrats have wrung concessions from her, forcing her to emphasise growth alongside austerity in her rhetoric. The finan
German constitutional court decision prediction
The outlook for the euro zone looks a lot less ominous now that the European Central Bank has waded into the crisis with its plan to snap up unlimited amounts of debt issued by the bloc’s more fiscally strained member states.
But a German constitutional court decision next Wednesday on the legality of two euro-zone bailout vehicles poses a major risk for the euro. If the court were to rule the temporary European Financial Stability Facility and the permanent European Stability Mechanism are unconstitutional, it would call into question the central infrastructure the monetary union’s 17 member nations have used to calm the debt crisis.
It would also hamper the latest bond-buying plan announced by the European Central Bank this week, which pumped the euro higher and brought down the cost of borrowing for Italy and Spain.
Since the German parliament has already approved the bailout mechanism, chances of the German court rendering it illegal are very low, said Marc Chandler, currency strategist at Brown Brothers Harriman, adding “it does pose some risk.”
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