German court to rule in September on eurozone bailout fund
- 16 July 2012
- From the section Europe
Germany's Constitutional Court will not give a ruling on the new eurozone bailout fund until 12 September, despite fears that delay could exacerbate the debt crisis.
The court's announcement means weeks of nervousness for politicians and market traders, correspondents say.
German MPs have backed the European Stability Mechanism (ESM), but it has not yet been ratified.
Some politicians and entrepreneurs want to block the ESM's introduction.
The court will also rule on 12 September on the fiscal treaty, which is aimed at forcing eurozone governments to adhere to strict budget discipline.
The petitioners against the new 500bn-euro (£404bn; $635bn) ESM and the fiscal treaty include the Left party (die Linke), the German association of family businesses and some leading economists.
Last week Finance Minister Wolfgang Schaeuble warned the judges that delaying a ruling would carry economic risks.
The 17-nation eurozone has agreed on a bailout for debt-laden Spanish banks, worth up to 100bn euros. The existing bailout fund, the European Financial Stability Facility (EFSF), will be used for that.
But for months markets and businesses in Europe have been urging politicians to boost the eurozone's lending firepower, arguing that the euro itself would be at risk if Spain or Italy needed a full-scale bailout.
That anxiety has kept borrowing costs for Spain and Italy high - yields on their sovereign bonds have risen to the 6-7% range considered unsustainable.
The ESM was supposed to start operating this month, but there have been ratification delays in several countries.
Key German role
German President Joachim Gauck will let the court rule before he signs the ESM and fiscal treaty into law.
The judges have previously ruled that the government must consult parliament more thoroughly before committing Germany to EU bailouts.
The new measures are fundamental to the eurozone's efforts to tackle the debt crisis and stabilise the euro.
Germany will account for 27% of contributions to the ESM, paying out 21.7bn euros in cash and providing guarantees worth a further 168.3bn euros. So German ratification is essential.
The ESM can start operating once member countries representing 90% of the fund's capital commitments have ratified it.
German Chancellor Angela Merkel said next year's German parliamentary election would be about "where Europe stands and what ideas we have about Europe".
Speaking in a ZDF television interview on Sunday she confirmed that she would seek re-election as chancellor, leading the centre-right Christian Democrats (CDU).
She said debt-laden Greece must stick to its agreements reached with international lenders. The new government in Athens has vowed to renegotiate parts of its 130bn-euro second bailout deal. Implementation has been slow because of the recent turmoil in Greek politics and large-scale protests.
Mrs Merkel said she would wait "another couple of weeks" for another report from the troika - Greece's international lenders - before deciding how to proceed with Greece.
The bailout programme for Greece dates back to 2010 and does not depend on the EFSF or ESM. But the sheer scale of Greece's debts and the budget cuts demanded have led to doubts about the euro's future.