By Tom Fairless
A member of the European Central Bank's executive board warned
Wednesday of serious consequences for the euro zone if Germany's top
court doesn't ratify the bloc's permanent rescue fund, the European
Stability Mechanism.
Germany's Federal Constitutional Court last week heard testimony on
several petitions that seek to keep the 500 billion euro ($615
billion) ESM from beginning its work until the court has time to rule
on the legal issues in the case.
If the court rules against the ESM, the rescue fund "would have failed
in its planned form," and the euro zone would be deprived of a "very
important crisis fighting tool," ECB executive board member Joerg
Asmussen told German news magazine Stern.
A handful of lawsuits by German lawmakers and citizens has put German
ratification of the bailout fund and the fiscal pact on hold until the
court rules on whether the ESM takes too much authority from German
lawmakers on the fiscal policy and the budget.
On Monday, the court said it won't make a decision until Sept. 12 on
whether to impose a temporary injunction that would block the ESM from
taking effect.
German government officials have warned that a significant delay to
the ESM could spark new financial-market turmoil because delay would
leave the euro zone without a viable firewall against financial
contagion for an uncertain amount of time.
Mr. Asmussen also warned of a "perceived north-south split" in the
European Union "such as I haven't experienced in 10-15 years," and
urged states to row back quickly from this divide.
Europe stands at a crossroads where states must either opt for further
political integration or allow Europe to move apart, he said.
Separately, Mr. Asmussen also urged Germany to implement further
reforms of its labor market and tax system rather than simply
demanding reforms of others.
While the country is profiting very strongly from labor market reforms
implemented in 2003-2004, there is still a lot to do, Mr. Asmussen
said. For instance, migrants could be better integrated into the labor
market and the tax system modernized, he said.
Write to Tom Fairless at tom.fairless@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
July 18, 2012 05:53 ET (09:53 GMT)
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