KARLSRUHE, Germany (AP) — A European Central Bank program that has been instrumental in calming the more than three-year-old eurozone debt crisis faced a legal challenge Tuesday in Germany's highest court.

The Federal Constitutional Court in Karlsruhe is considering arguments against the ECB's program, which has been widely credited with easing the turmoil in bond markets in the 17-country eurozone over the past nine months.

The program — known as Outright Monetary Transactions, or OMTs — is an offer by the ECB to buy the government bonds of a country in need of financial help. The purchases would help by lowering the country's borrowing costs in the bond markets.

The program was launched in September after ECB President Mario Draghi dramatically vowed in July to "do whatever it takes" to save Europe's common euro currency.

The ECB hasn't bought any bonds yet. But the program's mere existence has helped lower countries' borrowing costs in bond markets dramatically, easing fears the eurozone might break apart. To take part in the scheme, a country would have to commit to reduce its debts and deficits, as well as accept a bailout loan or credit line from the European Union's financial rescue fund, the European Stability Mechanism.

CRITICS

EU efforts to rescue financially troubled countries have run into popular opposition in countries like Germany, the Netherlands and Finland, which have been net contributors to the eurozone's financial rescue programs.

In Germany, opponents of the bond-buying program — known as Outright Monetary Transactions, or OMTs — say it oversteps the ECB's mandate, which forbids it from financing governments.

The people who brought the legal challenge to court are a disparate group of Germans including conservative lawmaker Peter Gauweiler, a team of professors, a citizens' organization and Germany's Left Party.

They claim the measure is illegal because both EU laws and the German constitution say that only the elected national parliament can decide how taxpayer money is spent.

Dietrich Murswiek, one of the plaintiffs' attorneys, argued that the bond purchase program exposed taxpayers to hundreds of billions of euros (dollars) in potential losses if the bonds are not repaid — without any democratic authorization from national parliaments.

"The ECB is turning the currency union into a liability union, without asking member states and their parliaments," he said.

The arguments against the ECB program have been added to another challenge against Germany's backing of the European Stability Mechanism, the eurozone's bailout fund.

SUPPORTERS

Proponents of the ECB program say it is legal and is needed for the ECB to fulfill its mission — keeping consumer prices stable across the eurozone.

In Berlin, Chancellor Angela Merkel noted that every eurozone rescue measure so far had been discussed and approved by Germany's supreme court.

"We will argue today that the ESM is important and that the European Central Bank is doing everything necessary to secure price stability," Merkel said at a conference organized by Germany's main industry lobby group.

She said she was confident the constitutional court would clear the ECB's program.

Finance Minister Wolfgang Schaeuble argued the ECB had remained within its mandate by announcing the bond purchases program.

He also said it was "highly questionable" whether the court had the legal basis to rule on the ECB's actions given that the ECB is an independent institution and is governed by EU law. He argued that if Germany's top court had the power to veto ECB actions, then the national courts of each of the 17 eurozone countries could do the same — that would be a legal nightmare that could hinder the ECB's every move and erode market confidence.

WHAT NEXT

Karlsruhe judges will hear oral arguments Tuesday and Wednesday; a decision might not come for several months.

A sweeping ruling against the ECB's program would effectively torpedo it. Analysts say an outright rejection is highly unlikely but markets are watching to see if the judges attach any conditions that might raise doubts about its effectiveness.

It's possible that some issues could be referred to the EU's own court, the European Court of Justice.

Among the notable officials to testify will be Jens Weidmann, the head of Germany's national central bank, the Bundesbank. Weidmann, who sits on the 23-member ECB rate-setting council by virtue of his job as Bundesbank head, was the only member to vote against setting up the OMT program on Sept. 6.

Joerg Asmussen, a former German finance ministry official who has since been appointed to the ECB's six-member executive board, was also present to defend the program.

_____

Geir Moulson contributed to this story from Berlin.

Source