German court addressing ESM
German finance minister Wolfgang Schaeuble told the country's top court today that any significant delay in approving the EU's permanent bailout fund could fuel financial market turbulence.
The Constitutional Court has begun a hearing into whether the EU bailout scheme and budget rules are compatible with German law.
"A considerable postponement of the ESM (the European Stability Mechanism bailout fund) which was foreseen for July this year could cause considerable further uncertainty on markets beyond Germany and a considerable loss of trust in the euro zone's ability to make necessary decisions in an appropriate timeframe," Mr Schaeuble said.
"Doubts in the constitutional possibility or the readiness of Germany to stem dangers for the financial stability of the euro zone could lead to the current crisis symptoms being exacerbated considerably," he said.
"Some member states of the euro zone would end up having further big problems financing themselves, which could raise questions over the stability of the euro zone as a whole."
Mr Schaeuble was addressing a hearing of the court which is examining complaints lodged by academics, lawmakers and ordinary citizens against the ESM and new budget rules which they say undermine German democracy.
"In politics, unusual situations and crises often require unusual measures," the head of the Constitutional Court, Andreas Vosskuhle, said at the start of the hearing.
Shares in major world markets rose today on optimism that the court will approve the fund
German central bank chief Jens Weidmann is also expected to address the hearing as well as plaintiffs including academics, rebels from Angela Merkel's own coalition and the hardline Left, and members of the public.
But despite pressure on Germany to complete its ratification of the ESM, which is already delayed and cannot come into effect without the biggest economy in the euro zone, Mr Vosskuhle said the court would not give a ruling today, but would weigh up whether to delay the laws until it has made its decision.
The government argues that these tools for tackling the debt crisis were given legitimacy by parliament's approval in June.
"The judges have to realise that the banking and debt crisis in Europe has put us in a situation that forces politicians into borderline decisions," said Helmut Brandt, a legal expert from the ruling coalition, urging the court to decide in two weeks.
Anything longer would mean a serious delay in implementing the ESM, which has already been postponed from July 1st, and raise serious doubts about whether Europe will really get the extra firepower it needs to combat the crisis.
But protesters outside the court in the southwestern city of Karlsruhe argued that the bailout fund and fiscal pact ceded too much power to Brussels on core issues such as budgetary powers, which should remain the remit of the German parliament.
Candles flickered around a cardboard tombstone bedecked with flowers, with the epitaph: "Here rests in peace the constitution of the German republic, born on May 23 1949, died on 29th June 2012. The citizens mourn."