July 17, 2012
There have been a couple of legal challenges made to the European Stability Mechanism. The challenge in Ireland seems to have been brushed aside but there is still, of course, an appeal to be heard. Even so, the progress of the ESM seems to be pretty smooth.
Yesterday, however, the German Constitutional Court decided to postpone their ruling on the ESM and fiscal treaty until 12th September. In terms of the eurozone crisis, nearly two months is forever.
Quite honestly, this shouldn’t be much of a surprise. Some of Germany’s heaviest hitters have publicly offered their suggestions as to what the judges should do. Judges are notorious for guarding their independence and postponing their verdict draws a very public line in the sand that they will not be rushed and that this runs their way and their way only.
The problem is that the pace at which problems seem to develop and then envelop a country are not aligned with this timetable. The court pointed out that there is enough money within the EFSF to help Spain further should it be required. After last week’s announcement of much further austerity by the Spanish government, that will be of little comfort to the Spanish people.
However, the shadow looming over the euro is not currently Spain. It is Italy.
With problems building and intensifying in all sorts of places, this is not the time to be factoring in a few weeks for a summer holiday. Central bankers, civil servants, economists, politicians and even a few judges will need to be working hard through the summer. Otherwise, things may have taken a turn for the very worse when they return.financialguy