* German ruling on ESM, fiscal pact to go ahead on Weds
* Top court rejects last-minute bid to delay ruling
* Lawmaker may refile challenge to ECB bond-buying
By Stephen Brown
BERLIN, Sept 11 Germany's Constitutional Court
will go ahead with a long-awaited ruling on Wednesday on the
legality of the euro zone's new permanent bailout fund and
budget rules, despite a last-minute legal challenge by a member
On Tuesday, the court rejected an attempt to further delay a
ruling on the European Stability Mechanism (ESM) and fiscal
compact, which had previously been pushed back by months while
the judges reviewed whether the German parliament is permitted
under the constitution to ratify the treaties.
Further delay to the ruling on the ESM would have upset bond
and currency markets which are already on tenterhooks awaiting
the green light from the 17-member euro zone's biggest economy.
If the court upholds injunctions in its ruling at 10 a.m.
(0800 GMT) on Wednesday, it will plunge the currency zone
deeper into turmoil by casting doubt on Europe's ability to
launch further rescue bids of heavily indebted southern states.
But legal experts believe the eight judges in the court's
Second Senate will approve the bailout fund and budget package,
while possibly imposing tough conditions that would limit
Berlin's flexibility on future rescues.
Bielefeld University law professor Franz Mayer said the
decision on Tuesday not to admit the last-ditch challenge lodged
by conservative, eurosceptic lawmaker Peter Gauweiler was a
"positive signal" for those hoping the court will allow the
ratification of the new EU deal on Wednesday.
"It indicates that the judges know very well what they can
do and what they cannot do and proves that they are well aware
of the consequences of their decisions in the euro context," he
said, adding that Gauweiler had a record of "filibustering".
Nonetheless, EU financial legislation is increasingly
butting against limits the German constitution sets on national
institutions relinquishing powers, so more cases seem likely.
Few German law professors expect the court to go as far as
to signal on Wednesday that Germany must change its constitution
and hold a referendum before it can take part in any further
integration of the European Union. Such a vote could complicate
Merkel's expected bid for a third term a year from now.
However, the constitutional complaint by Gauweiler, a member
of the Bavarian regional party in Merkel's centre-right
coalition, could still upset European policymakers' latest
attempts to solve the three-year-old sovereign debt crisis.
His case, lodged at the weekend after the European Central
Bank announced plans for unlimited purchases of bonds of
crisis-hit euro states to reduce their borrowing costs was not
admissible for procedural reasons, legal experts said - because
an ongoing case cannot be broadened to include new complaints.
"QUESTION MARKS" ON ECB
But some law professors said Gauweiler's argument - that
Germany should not ratify the ESM until the ECB rows back on the
bond-buying plan - could hold water and will pose a problem if
Gauweiler, a frequent plaintiff in Karlsruhe, refiles his case.
The court did not go into its merits in a statement which
said only that Wednesday's ruling "will go ahead as scheduled".
But Humboldt University's Kai von Lewinski said there was a
"pretty good case" for the complaint by Gauweiler, who has some
like-minded allies within Merkel's conservative bloc.
Lewinski said the constitution is interpreted as setting two
key conditions on Germany's transfer of monetary sovereignty to
the ECB, and both had been called into question, notably by the
ECB plan for open-ended purchases of government bonds:
"There is a specific provision in the constitution which
basically says the German state may only transfer monetary
sovereign rights to the European Union if: there is a central
bank that is independent - question mark now; and that has the
primary goal of securing price stability - second question
mark," he said.
While Germany's central bank has criticised ECB chief Mario
Draghi's bond-buying plans, the chancellor backs the Italian
while insisting that Bundesbank chief Jens Weidmann, once one of
her senior aides, plays a useful role by warning of the risks.
Gauweiler declined to comment immediately on the formal
rejection of his case, but if he does refile it, the red-robed
judges in Karlsruhe are likely to have much more to say about
the constitutionality of the euro zone rescue plan.
While the German court cannot stop the ECB from buying bonds
as it has no jurisdiction over European institutions, Lewinski
said, it does have the power to force Germany out of monetary
union if this does not comply with the German constitution.