KARLSRUHE (MNI) – Judges of Germany’s Constitutional Court
expressed concern during a day-long hearing Tuesday over finding the
right balance between a quick ruling on the European Stability
Mechanism’s constitutionality, and taking more time to get their
decision right.

Exactly when a decision will be taken was left open by the
eight-member panel. The court adjourned after a nearly 11-hour hearing
without offering details on its plans.

Judges in their questions of witnesses suggested a two-part
decision was perhaps most likely, first on the demands for a temporary
injunction against ESM in about three weeks, and then in early 2013 on
the broader constitutional question.

But the court also suggested uncertainty over how far a decision
over the temporary injunction should go. They pressed witnesses over
exactly how much time the court has to reach a ruling, even raising the
possibility of a “middle solution” of a single, full decision in two to
three months.

With government witnesses warning of serious consequences for EMU
of a long delay, judges seemed to acknowledge that granting even a
temporary injunction could be interpreted as a sign that they were
leaning against approving the ESM and Fiscal Compact, which was passed
with a two-thirds majority by Germany’s parliament last month.

An injunction “will be interpreted by the foreign press as
‘euro-rescue is halted'” Court President Andreas Vosskuhle said during
the hearing into the injunctions sought by opponents of European rescue
fund.

But Vosskuhle also recognized opponents’ arguments that allowing
the ESM to enter into force now could make the treaty unstoppable,
rendering any future ruling on its constitutionality ineffective. The
timing of its decision clearly is “not easy,” he said.

German Bundesbank President Jens Weidmann said in his testimony any
assessment of the consequences of a delay is “highly speculative” and
noted the temporary EFSF had enough funds available to handle even the
envisaged programs for Spain and Cyprus.

But he also acknowledged an ESM delay could carry consequences if
the situation in Europe were to deteriorate further in the coming weeks
or months.

“In such a scenario, doubts about the adequacy of the available
financial resources would cause greater uncertainty,” Weidmann said.
This could also increase pressure on the ECB, and therefore increase the
risks for its balance sheet, Weidmann said.

German Finance Minister Wolfgang Schaeuble was more aggressive,
telling the court it was a “question of weeks.” In comments to reporters
after, he emphasized that ESM must take effect in order to give the
broader Eurozone reforms being enacted time to take hold

Schaeuble earlier warned the consequences of delay would extend
“far beyond Germany,” including financial ramifications and a “clear
strengthening” of the Eurozone crisis, which could once again lead some
European countries to have serious refinancing problems.

Opposition demands for an injunction already stopped the ESM from
taking effect July 1 as originally planned. The Constitutional Court had
asked Germany’s president not to sign the ESM and Fiscal Compact into
law until it could rule on the injunctions.

Opponents argued the ESM and Fiscal Compact will permanently curb
the German parliament’s budgetary powers and would therefore require a
change of the constitution to be approved. They also argued an
injunction would not be especially damaging, given the EFSF will remain
in place until June 2013.

–Frankfurt bureau: +49 69 720 142; email: ccermak@marketnews.com

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