Germany Faces Delay in Ratifying Euro Rescue Fund

The pleasant news arrived from the northeastern port city of Rostock on Thursday. German President Joachim Gauck was to be named an honorary citizen of the city of his birth. The other news, which came from the southwestern city of Karlsruhe, was not as uplifting. The judges on Germany's highest court, the Federal Constitutional Court, had asked the president to delay signing the European Stability Mechanism (ESM) and the European Union fiscal pact into law.

The Constitutional Court, anticipating challenges to the legislation, wanted more time to review documents. Gauck, hardly three months in office, was already faced with an important decision. If he complied with the request from Karlsruhe, at least one piece of legislation proposed by Chancellor Merkel and her coalition government -- the permanent bailout fund known as the European Stability Mechanism (ESM) -- would undoubtedly be delayed. The ESM was originally scheduled to come into force on July 1, 2012.

Now the ESM will have to wait.

Gauck doesn't want to sign the two laws, at least for now, when they are presented to the two houses of the German legislature -- the federal parliament, the Bundestag, and the upper legislative chamber, the Bundesrat -- for ratification next week. However, laws in Germany are only considered ratified, and therefore binding under international law, when signed by the president. Now it could take another two or three weeks before the court rules on possible emergency appeals.

Declining a request by the Constitutional Court judges, especially on such a delicate matter, would have created a massive conflict and set off a debate on the question of whether a German president in cases of doubt has the power to ignore Karlsruhe. It was a conflict Gauck was anxious to avoid. According to a statement by the president's office, Gauck intended to "comply with the request, in keeping with standard government practice among the constitutional bodies, and out of respect for the Federal Constitutional Court, as soon as the Bundestag and the Bundesrat have adopted the corresponding treaty laws."

For Merkel, this means that what has already been a grueling struggle over rescuing the euro is now entering the next phase. A ratification on July 1 would have sent a strong signal to the financial markets: Namely that the euro rescue is going according to plan. But now, at least for a while, it will remain subject to a possible decision from the Karlsruhe court. That may not be a disaster, but it is a symbolic setback for European leaders seeking to rescue the euro. Once again, those plans face another delay.


Spiegel