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Germany's ratification of EU fiscal pact, ESM to be delayed

Country's highest court says that it will rule on the constitutionality only by mid-September

Press Trust of India  |  Berlin 

Germany's ratification of the European Union's 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 in Karlsruhe on Monday freezes the plans to implement two main initiatives to resolve the debt crisis until it delivers 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 and the

They argued that the 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 law, which bars member nations from bailing out each other, they said.

The 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 and the fiscal pact, were voted with a two-third majority by both houses of the German parliament on June 29.

However, President 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 and the can't be completed.

So far, 13 of the 17 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.

Several German and politicians have appealed to the constitutional court to take a speedy decision, warning that further delay could heighten the nervousness in the financial markets and exacerbate the crisis.

They had also warned against "grave consequences" for and the euro-zone as a whole if the and the were declared unconstitutional by the court.

"On the basis of the hearing on 10th July, the second senate of the will deliver its verdict on 12th September," the court said in a brief press statement.

The court's president Andreas Vosskuhle had already indicated at last Tuesday's hearing on the petitions that it needed more time for a "very thorough examination" of the complaints against the and the

contributes around euro 22 billion in cash to the euro 500 billion ($635 billion) In addition, also provides guarantees worth another euro 168 billion. Therefore, the country's ratification is crucial for the to start operation.

First Published: Tue, July 17 2012. 11:38 IST