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The bailout of AIG four years ago, was a defining moment in the U.S. economic crisis. Tomorrow brings a defining moment for Europe as it grapples with its own financial crisis. As NPR's Philip Reeves reports, a court in Germany will deliver a verdict in a case that goes to the very heart of Europe's strategy to save the eurozone.
PHILIP REEVES, BYLINE: Karlsruhe is a small university city on the banks of the Rhine, and the edge of the Black Forest. Usually it's pretty quiet. It won't be tomorrow. The city also happens to be the seat of Germany's hugely powerful federal constitutional court. Tomorrow, eight judges from that court will don their flowing red robes and red hats, and deliver a verdict that's being closely watched by governments across the map. That verdict could theoretically torpedo the eurozone's efforts to save itself from collapse. Pieter de Wilde, senior researcher at Berlin's Social Science Research Center, says if that happens, it'd be very messy, especially for Europe's struggling southern nations.
PIETER DE WILDE: There could be a massive bank run, a massive capital flight from these southern countries. Which leaves them no choice but to leave the eurozone, which then raises the question whether the eurozone will continue to exist.
REEVES: One of the key aspects of the court case concerns what's known as the European Stability Mechanism. That's the long-winded term for a new $640 billion dollar fund that's intended to rescue ailing eurozone nations. At issue is whether Germany's participation in that fund violates its national constitution by placing German taxpayers' money at risk without democratic control. The fund is a central pillar of Europe's strategy for resolving the crisis. Germany is the driving force behind its creation, and by far it's biggest guarantor.
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REEVES: On the streets of Karlsruhe, hundreds of Germans deliver their verdict at a weekend rally.
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REEVES: They urge the red-robed judges to stop German money being assigned to the fund. They dislike their taxes being used to underwrite what they see as inefficient and profligate neighbors in Southern Europe. Polls suggest a narrow majority of Germans agree with them. But many Germans are conflicted. They know Germany benefits greatly from the single currency. They don't want the euro to collapse. Yet they also fear they'll wind up signing an open check to prop up Europe's weaklings. Listen to Julia Martin, a hairdresser walking her dog in the sunshine today in Germany's capital, Berlin.
JULIA MARTIN: (Through Translator) It's not the first time that Germany has had to help out, and it's absolutely fine that we're helping. But there's no limit to it anymore.
REEVES: Martin has some questions that you often hear on the lips of Germans these days.
MARTIN: (Through Translator) What about us? What about us Germans? Our taxes are paying for other countries in Europe. That's fine. But what about us? We don't get anything.
REEVES: Most analysts believe Germany's constitutional court judges, who will announce their verdict tomorrow, understand the fate of Europe is at stake and will not jeopardize the eurozone's rescue efforts. Pieter de Wilde is confident the court will allow the German government to participate in the fund, but he expects its findings to be nuanced.
WILDE: I interpret the ruling tomorrow more as a sign by the court saying look, we will continuously check every next step in European integration, so please consult us in the next steps to make sure that you're not overstepping your boundaries.
REEVES: In other words, the court will set conditions for Germany's involvement in future eurozone bailout initiatives. As Germany is by far the biggest player on the block, that would likely complicate Europe's already cumbersome and so far inconclusive attempts to avert a meltdown. Philip Reeves, NPR News, Berlin.
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