Germany’s ratification of the European Union’s fiscal pact on budgetary discipline and the permanent bailout fund, ESM, will be delayed at least by two months as the country’s highest court has said it will rule on their constitutionality only by mid-September.

The decision by the Federal Constitutional Court in Karlsruhe on Monday freezes the plans to implement two main initiatives to resolve the Euro Zone debt crisis until it delivers its verdict on September 12 on whether they are in line with the German Constitution.

The court has been examining since last Tuesday a number of petitions filed by lawmakers of the ruling and Opposition parties, the Left party, a group of leading economists and the citizens’ group “more democracy”, urging the court to issue a temporary injunction on the fiscal pact and the ESM.

They argued that the ESM carried “incalculable risks” for Germany, which will come under increasing pressure in the coming years to step its contributions for supporting weaker member nations.

The European Stability Mechanism (ESD) is also in violation of an EU law, which bars member nations from bailing out each other, they said.

The fiscal pact to enforce strict budgetary discipline, which was signed by 25 of the EU’s 27-member nations in March, is an infringement on the German Bundestag’s responsibility for the federal budget, the plaintiffs have argued.

Government legislations on the ESM and the fiscal pact were voted with a two-third majority by both Houses of the German Parliament on June 29.

However, President Mr Joachim Gauck had made it clear earlier that he will not sign them into law until all doubts about their constitutionality are cleared by the highest court. Without his signature, Germany’s ratification of the fiscal pact and the ESM can’t be completed.

So far, 13 of the 17 Euro Zone member nations have ratified the bailout fund, which replaces the temporary bailout fund, the European Financial stability Facility (EFSF).

The ESM, meanwhile, was originally scheduled to come into operation on July 1.

(This article was published on July 17, 2012)
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