* German judges may take months to rule on ESM, fiscal pact
* Constitutional Court has not blocked bailouts in past
* Markets and politicians frustrated at delayed verdict
By Stephen Brown and Madeline Chambers
BERLIN, July 11 Germany's top court, which has
already proved a "nuisance" by delaying Europe's newest tools
for fighting the debt crisis, is likely to set conditions for
their approval that could go as far as demanding a referendum.
"It is our task to be a nuisance when it comes to European
policy and integration," is how one judge defined the role of
the Constitutional Court, which on Tuesday defied pressure for a
snap verdict to allow Germany to ratify the crisis measures. The
judge agreed to discuss the role on condition of anonymity.
The court in the southwestern city of Karlsruhe could take
as long as three months to rule on the already delayed European
Stability Mechanism (ESM) - the euro zone's permanent rescue
fund - and the fiscal pact for budget discipline in Europe.
This uncertainty is infuriating Angela Merkel's government,
which must however hold its tongue when talking about Germany's
version of the Supreme Court, set up in 1951 to avoid a return
of Nazi-style tyranny and keep checks on chancellors' power.
The court has a history of testing leaders' patience. West
Germany's first post-war chancellor, Konrad Adenauer, called it
"the dictator of Germany".
But while the government and markets are optimistic Germany
will eventually be allowed to ratify the ESM - which boosts the
euro zone's firewalls against contagion by the debt crisis - and
the fiscal pact, the court may decide that these laws strain the
limits of German law so much they should be put to the vote.
The court has so far limited its rulings in the debt crisis
to approving bailouts while "wagging a finger" at the government
to consult parliament more fully - but it may now decide to make
a stand, said public law professor Matthias Kumm.
"It now has a reputation of being a court that barks but
doesn't bite. Some members of the court don't like that
description and are highly inclined to do something that makes
an impact," said Kumm, from Berlin's WZB social research centre.
This could involve giving the green light to the emergency
legislation - on condition that the people are consulted first.
The Constitutional Court's president, 48-year-old Andreas
Vosskuhle, is an avowed fan of a "federal Europe" who has said
that while the German people want "a strong Europe", they also
want to directly influence it.
Another crucial figure among the eight judges - out of the
total 16 - who sit on the court's Second Senate that will decide
on the ESM and fiscal pact is Peter Huber, the judge whose job
it is to draw up the draft of the senate's findings.
In his current role and previously as a law professor in
Munich, Huber has championed the idea of a referendum on Europe
if more powers are to be shifted to Brussels.
Debate among the eight judges who include academics, lawyers
and even a former state premier, will be intense when they shed
their ceremonial red robes and caps to meet behind closed doors.
Vosskuhle describes the atmosphere as "almost monastic", but
politics professor Tanja Boerzel said judges "had to be aware of
the implications this all has for financial markets" and might
move quickly now they have made their point.
With approval by a so-called "constitutional majority" of
more than two thirds in both houses of parliament, the new laws
essentially had all the democratic legitimacy they needed, said
the Berlin Free University professor.
But by floating the option of a "very thorough summary
review" taking up to three months, and then approving the laws,
Vosskuhle would help silence "the populists trying to capitalise
on the euro crisis" for political ends, Boerzel told Reuters.
For prominent Bavarian eurosceptic member of parliament
Peter Gauweiler, a backbencher from Merkel's conservatives, it
is more a question of the government "being pushed around by
Finance Minister Wolfgang Schaeuble acknowledged before the
court on Tuesday that markets are "extremely anxious" and any
uncertainty gives rise to questions "like 'is Europe able to
take the decisions needed to overcome this crisis of confidence
with the necessary reliability and within a reasonable time?'."
The ESM, which would boost the euro zone's firewalls against
debt crisis contagion to 700 billion euros, needs ratification
by states representing 90 percent of its capital to take affect
- meaning it cannot be launched without German blessing.
The plaintiffs, including 12,000 ordinary citizens,
euro-sceptic academics and dissidents from Merkel's own
coalition and the hardline Left Party, essentially argue that
the rescue fund and the fiscal pact would undermine German
lawmakers' right to decide on the national budget, in violation
of the constitution.
In earlier rulings on Europe - on the Lisbon Treaty in 2009,
and on Greek loans and European Financial Stability Mechanism
(EFSF) in 2010 - Karlsruhe got a reputation as a thorn in the
side of the euro zone by insisting on the rights of the
But it also rejected injunctions against the bailouts and
ruled that the EFSF did not violate parliament's budget rights.
Even February's ruling on fast-track approval of EFSF operations
by a special panel of nine members of the Bundestag gave it the
go-ahead when confidentiality is required for market operations.
Commerzbank's chief economist Joerg Kraemer said he believed
that "in the end the Federal Constitutional Court will not veto
the ESM/fiscal compact", though it could take a few months.
He expects the court to insist further on full parliamentary
consultation, while saying this would be "more of a fig leaf and
will not derail the ESM/fiscal compact".
Kumm at Berlin's WZB said it was highly unlikely the court
would block the ESM and fiscal pact, but cautioned that some of
the judges were "very inclined" to push for a referendum first.
"Whether or not the pressure is building to such an extent
that they will ultimately refrain from doing this is a question
that is impossible to answer," said the professor.