Germany's highest court The Federal Constitutional Court has deferred its ruling on the legality of Eurozone's permanent financial rescue fund, the European Stability Mechanism (ESM) and the EU's fiscal pact on budgetary discipline.
Berlin: Germany's highest court The Federal Constitutional Court has deferred its ruling on the legality of Eurozone's permanent financial rescue fund, the European Stability Mechanism (ESM) and the EU's fiscal pact on budgetary discipline.
The development has cast a shadow over the 17-nation currency area plans to revive their debt-ridden economies.
The Federal Constitutional Court in Karlsruhe announced on Tuesday night after a nine-hour marathon hearing on a number of petitions against the ESM and the fiscal pact that it needed more time to come up with its verdict.
The plaintiffs comprised lawmakers of the ruling and opposition parties, a group of university professors, an association of 'Citizens for More Democracy' representing over 12,000 people and the parliamentary faction of the opposition Left party complained that the two key initiatives to solve the Eurozone debt crisis were in violation of the German constitution.
They wanted the court to decide in summary proceedings whether President Joachim Gauck should sign into law two legislations on the ESM and the fiscal pact, which were voted with a two-third majority by both houses of German parliament at the end of last month.
The court needs more time for a "very thorough examination," its president Andreas Vosskuhle said after it heard a number of complainants and questioned German Finance Minister Wolfgang Schaeuble and president of the Bundesbank, Jens Weidmann.
The ESM was originally scheduled to replace the temporary bailout fund, the European Financial Stability Facility (EFSF) on July 1. Now it looks very likely that its start may be delayed by several months.
President Gauck had already indicated that he will not sign the two legislations into law until the constitutional court clears all doubts about the constitutionality of the ESM and the fiscal pact.
Without his signature, they cannot be ratified and Germany?s support is very crucial for both the ESM and the fiscal pact to take off.
Germany contributes around 22 billion euros in cash to the ESM, which has a total funding capacity of 700 billion euros (860 billion dollars). In addition, Germany also provides around 168 billion euros in credit guarantees.
The plaintiffs argued in their petitions that the ESM had violated the European Union's bar on member nations to bailout each other. They expressed fears that euro zone?s major economies such as Germany will come under increasing pressure to contribute permanently for the bailout of weaker member nations.
The plaintiffs also criticised last week's decision by Eurozone finance ministers to allow direct ESM support for eurozone banks for the first time.
In their view, the fiscal pact to enforce strict budgetary discipline in the EU is an infringement of the Bundestag’s responsibility for the federal budget.
Leading politicians of Germany's ruling and opposition parties and EU leaders in Brussels warned the judges at the constitutional court against the risks for Germany and the euro zone as a whole if the ESM and the fiscal pact were declared unconstitutional.
Schaeuble appealed to the court not to block the ESM or the fiscal pact and warned that if the court takes a very long time to come up with its verdict, that will have a negative impact on the credibility of the Eurozone and dampen investor confidence in euro zone?s ability to solve its problems.
The financial markets are extremely nervous and further delay in starting the EMS will not help calm the situation, Schaeuble said. He also expressed fears that doubt about Germany's ability to help its struggling Eurozone partners could further aggravate the present debt crisis.
The plaintiffs, who included former justice minister Hertha Daeubler-Gmelin, lawmakers of ruling and opposition parties, a group of university professors and the opposition Left party, have rated as an "initial success" that their complaints were not rejected outright by the court.