A new challenge to the European Stability Mechanism, the eurozone's permanent €500 billion rescue fund, has been filed in the German constitutional court, seeking to delay ratification by Germany until it has sought the opinion of the European Court of Justice in Luxembourg.
If the challenge is accepted by the German court, it could delay creation of the ESM by several months, creating yet more instability in eurozone financial markets, and uncertainty over the resources available to support countries such as Italy and Spain if they face any further increase in their borrowing costs.
It would create a legal precedent in Germany because the constitutional court has never before asked the European court for its opinion on a case. The latest suit comes on top of a series of constitutional complaints brought in the German court seeking an injunction to prevent the ESM being set up, on the grounds that it undermines the budget sovereignty of the Bundestag, the national parliament in Berlin, and is not subject to proper democratic control.
The court in Karlsruhe has promised to give an interim decision on the complaints by September 12, because of the urgency of establishing the ESM as a “firewall” to stabilise bond markets in the eurozone. The latest case, brought by Europolis, a eurosceptic think tank in Berlin, calls on the German court to refer the matter to the ECJ, which has already been asked to rule on a separate case submitted by the Irish supreme court in Dublin.
The ECJ only received the Irish request on August 3 for a preliminary judgement on the legality of the amendment to the EU’s Lisbon treaty allowing the ESM to be created.
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