German court could block euro pact

An attempt to block to block the eurozone’s permanent rescue fund and Europe’s new fiscal discipline treaty will be heard by Germany’s high court next week.

An attempt to block to block the eurozone’s permanent rescue fund and Europe’s new fiscal discipline treaty will be heard by Germany’s high court next week.

The German parliament has approved both the €500bn rescue fund, the European Stability Mechanism, and the budget pact – the so-called fiscal compact, a cherished project of Chancellor Angela Merkel.

But opponents have asked the Federal Constitutional Court for injunctions blocking the plans while judges consider whether they are in line with German law.

Germany’s president Joachim Gauck has agreed not to sign the legislation before the constitutional court rules. The ESM cannot take effect without Germany’s approval.

The fund was initially meant to be operational from this month, and European policy makers still hope that it can replace its temporary predecessor, the European Financial Stability Facility, by the end of the month. According to plans agreed at an EU summit last week, for instance, the ESM is meant to handle the billions Spain has been offered to recapitalise its ailing banks.

The hearing will be held next Tuesday in Karlsruhe.

If the court issues an injunction, the ESM’s ratification could be delayed by many months, dealing a blow to the 17-nation eurozone’s crisis management. Should the court side with the government, in turn, the legislation would be allowed to go ahead, and a full hearing and verdict on the case then wouldn’t come until a few months later.

In previous similar cases, the court has sided with the government and has thrown out attempts to block timely legislation.

Those calling for the injunctions include the parliamentary caucus of Germany’s ex-communist Left party, a group led by a dissident MP from Merkel’s conservative centre-right block and a pro-democracy initiative that has gathered 12,000 signatures for its motion against the legislation.

The opponents maintain the treaty on fiscal discipline unduly limits the German Parliament’s ability to control the country’s budget. On the ESM, they argue that it lacks proper democratic oversight structures, and that the potential liabilities on German taxpayers are “irresponsible.”

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