RENEE MONTAGNE, HOST:
It's shaping up to be an important day for the European Union and the future of its currency. In the Netherlands, there is a parliamentary election that's expected to be a barometer of Dutch support for staying in the eurozone. Also this morning, a plan was unveiled to give the European Central Bank the power to supervise the big financial institutions in Europe. And, Germany's high court ruled that the European bailout fund is legal.
NPR's Jim Zarroli joins us now from Berlin to talk about this.
JIM ZARROLI, BYLINE: Good morning, Renee.
MONTAGNE: Let's start with that German court ruling. Exactly what it is and what's its significance?
ZARROLI: Well, this came out a little while ago. The court has basically given the green light to the fund that is used to bail out some of the countries that are struggling with a lot of debt. There's a lot of unhappiness in Germany about how far the country has gone to bail out some of its neighbors in the eurozone. There was a legal challenge to Germany's participation. If the court had upheld the challenge, it really would have completely upended the entire effort to get the debt problems under control, but the court said, you know, the bailout fund is constitutional. So I think the fund just kind of dodged a bullet and you've seen the euro climb as a result this morning.
MONTAGNE: And how about the German public? Are they happy with this? Because, as you said, there's a lot of complaining there.
ZARROLI: Yeah. And it's an especially sensitive time politically. Last week, the European Central Bank came out with a plan to buy essentially an unlimited amount of bonds of countries with a lot of debt in an effort to help them keep their interest rates down. The court did try to address some of these concerns by attaching conditions to the bailout that will sort of draw boundaries around Germany's participation. The stabilization fund also has to keep parliament informed about how much money is being spent. But really, overall, I think this is a big step forward in the entire effort to address the debt crisis. I mean, if Germany had pulled out the fund would have collapsed.
MONTAGNE: And then let's get to that question about strengthening the European Central Bank, which is essentially what would happen if it became supervisor of all the other financial institutions in Europe. Where is that coming from, and what is that all about?
ZARROLI: Well, the European Commission is proposing a single regulatory union that would cover all of the banks in Europe. You know, like the banks in the United States, a lot of European banks got into big trouble in the financial crisis. We still have a lot of bad, risky assets on their books. The EC wants the power to supervise all of the banks. There would also be a fund that would be used to close troubled banks. And they are proposing a scheme to protect deposits. So lots of details have to be worked out and it still has to be approved by the different EC governments, and we shouldn't underestimate, you know, how difficult that will be. But in some ways they are moving toward more of a U.S.-style regulatory regime with a certain amount of regulatory power held by the central government. I think a lot of people think this is inevitable, given just the nature of the eurozone and the kind of global nature of the banking business today.
MONTAGNE: And finally, voters in the Netherlands - as we mentioned - are going to the polls today. How much is this whole financial crisis likely to affect the outcome?
ZARROLI: Well, I think it will affect it a lot. The Netherlands is really a small country, but it is a strong and important economy. And just as in Germany, you know, you're seeing, you see a lot of unhappiness about the degree to which it's having to bail out other countries. Earlier this year, the ruling coalition fell apart. New elections were called. I think there was concern that some of the far-right parties that are very skeptical of the euro would see their support expand. I think the best guess now is that the mainstream parties will win. But the question really is, you know, how much of that unhappiness over the bailout will play a factor in the voting today.
MONTAGNE: All right. Jim, thanks very much.
ZARROLI: You're welcome.
MONTAGNE: NPR's Jim Zarroli joined us from Berlin.
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