POLL-German court to give qualified 'yes' to euro rescue steps

* All 20 experts polled see green light for ESM, fiscal

compact

* Law professors expect court to set tough conditions

* Majority don't see court paving way for referendum

BERLIN, Sept 7 (Reuters) - Legal experts polled by Reuters

unanimously expect Germany's top court to approve the euro

zone's new bailout fund and budget rules next week, but they

also believe it will impose tough conditions limiting Berlin's

flexibility on future rescues.

All 20 public and constitutional law professors surveyed

predicted that Wednesday's ruling would throw out the temporary

injunction request against the European Stability Mechanism

(ESM) and the fiscal compact for budget discipline in Europe.

If the court backed the injunction request, it would have a

devastating impact on bond and currency markets, pushing the

17-state currency zone deeper into turmoil by casting doubt on

its ability to launch further rescue bids of heavily-indebted

southern member states.

The experts polled all expected the Constitutional Court in

Karlsruhe to qualify their approval, with 12 saying it will set

strong conditions, in part to limit German exposure to bailouts

and strengthen parliamentary oversight.

A quarter of the law professors believe the court will also

signal European integration has reached the limits permitted by

Germany's "Basic Law", raising the prospect of an unprecedented

referendum on a new constitution to permit deeper integration.

"I think the Constitutional Court will let both treaties

pass," said Kai von Lewinski at Berlin's Humboldt University,

adding that it might insist on attaching a "clarifying sentence

that German liability has to be limited".

The conditions imposed "will be far-reaching because the ESM

isn't constitutionally justifiable", said Florian Becker of Kiel

University, who would like to see the judges take stronger

action to defend German sovereignty.

None of the experts, mostly from law faculties in Germany

but including academics overseas, believed the eight judges of

the Second Senate of the court would stop Germany from ratifying

Europe's new tools for fighting the three-year-old debt crisis.

The European Central Bank declared on Thursday it was

prepared to buy the bonds of struggling euro zone members in

unlimited amounts but only after they first sought help from the

rescue fund and signed up to the conditions attached.

LIGHTNING ROD

The plaintiffs now number 37,000, including eurosceptic

rebels from Chancellor Angela Merkel's coalition and academia,

as well as the hardline Left Party and members of the public.

They argue that the two treaties undermine lawmakers'

constitutional right to decide on budget matters and could

expose Europe's top economy to unlimited liability if other

states fail to pay into the ESM.

Daniel Thym from the University of Konstanz said the court

in the southwestern city of Karlsruhe had become the "lightning

rod" for euroscepticism in Germany, which has not yet spawned a

major political party but is nurtured by part of the news media.

However, academics say its earlier rulings on the European

Union's Lisbon Treaty in 2009 and Greek loans and the European

Financial Stability Facility (EFSF) in 2010 suggest the court

will give the green light, while imposing certain conditions.

These could range from reiterating that the Bundestag (lower

house) must be consulted before the ESM is deployed to seeking

more parliamentary involvement if its funding or instruments are

to be changed. It could even demand that Germany's ratification

include a reservation making clear its liability is limited.

One of the most unsettling scenarios for Merkel and her euro

zone peers would be the inclusion in next week's ruling of a

clear signal from the court that it considers a referendum on

Europe is necessary before Germany agrees to more integration.

Fifteen of the 20 experts do not expect such a sign, but

many still see the time approaching when the Basic Law, which

does not give a framework for national plebiscites, will need

replacing to allow Germans a direct vote on Europe.

Opinion polls suggest that would be popular with the public

but it would also be hugely disruptive if it came near the 2013

elections when Merkel will seek a third term. Experts say the

red-robed judges -- and especially their media-savvy 48-year-old

court president, Andreas Vosskuhle -- are well aware of this.

"The judges are not professors in an ivory tower, they know

what they are doing and that their decision can affect European

history," said Lewinski.

Hugely respected in Germany, the court's political influence

far exceeds that of the U.S. Supreme Court, according to

Russell Miller, a U.S. academic and co-editor of the German Law

Journal.

He said the court has been building up jurisprudence for

decades "that says 'just this much Europe and no more'. At some

point that 'no more' has to bite, doesn't it?" said Miller, the

co-author of a new book on German constitutional law.

(Additional reporting by Matthias Sobolewski; Writing by

Stephen Brown; Editing by Noah Barkin)

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