Tomorrow Decides the Fate of the ESM.

BERLIN—Eight judges in a sleepy German town on Wednesday will decide whether to torpedo European leaders' strategy for taming the euro-zone debt crisis.
The German government and most legal analysts predict the country's constitutional court won't block the currency bloc's planned permanent bailout fund, the European Stability Mechanism. If they are wrong, howev
er, the euro zone could find itself short of authorized funds to prop up struggling members such as Spain, forcing Europe to redesign its safety net for crisis-hit countries.
The Karlsruhe-based court is deciding only whether to grant a preliminary injunction that would suspend Germany's ratification of the ESM, pending a full ruling on whether the ESM is compatible with Germany's constitution, expected in December. But analysts say Wednesday's verdict will send a clear signal about the court's final decision.
Last year, the court approved the euro zone's temporary bailout fund, the European Financial Stability Facility, rejecting complaints that it undermined German democracy and the no-bailout clause of the European Union treaty. But the judges forced the government to seek parliamentary approval for every new aid package.
Many legal analysts say the court might once again strengthen parliaments' rights as its condition for allowing the ESM to proceed. That could potentially make new bailout deals in Europe even trickier politically for Chancellor Angela Merkel at home, where she faces growing opposition to bailouts within her governing coalition.
Without the ESM, euro-zone governments would have only the dwindling financial resources of the EFSF on which to fall back. Most of the EFSF's money is committed to bailouts of Greece, Ireland and Portugal and the recapitalization of Spain's banks, leaving as little as €150 billion ($192.2 billion).
Although financial markets hope the European Central Bank, with its money-printing press, will prop up the shaky bond markets of Spain and Italy, the ECB has said it would only intervene in tandem with the government-backed bailout funds. The EFSF would quickly run out of its remaining money if it started buying Spanish or Italian bonds. The ESM would bring another €500 billion in lending capacity, although it wouldn't be fully available until early 2014.
If Germany's top court were to strike down the ESM, governments could try to expand and extend the EFSF, which is set to expire in mid-2013. But German Finance Minister Wolfgang Schäuble last week said the government is counting on the ESM, and that he is certain the court won't block it. "We have no plan B, and we don't need one either," he said.
Germany's Parliament voted in June to ratify the ESM, but German President Joachim Gauck still needs to sign it into law. He is expected to do so quickly if the constitutional court rejects the injunction demanded by the ESM's opponents. 
All other euro-zone countries have ratified the ESM, apart from Italy and Estonia. The German court is seen as the biggest hurdle, however. Financial markets and much of official Europe will be watching closely when the German justices take the bench in their red robes and hats, led by the court's youthful president, 48-year-old Andreas Vosskuhle.
The challenge to the ESM comes from the biggest-ever mass complaint heard in Germany's equivalent of the U.S. Supreme Court. About 37,000 plaintiffs have signed the petition demanding the court shelve the ESM, including law professors, economists, a few members of Ms. Merkel's center-right coalition, the radical Left Party, and thousands of ordinary citizens who are fed up with bailout of other euro-zone nations.
The complaint alleges the ESM strips Germany's Parliament, the country's most important democratic institution, of control over the national budget and taxpayers' liabilities. Plaintiffs from the political right say it breaks the no-bailouts clause of European treaties; the left says it violates democracy for the benefit of international speculators.
Germany's government is confident the court will uphold the ESM, because Germany's Parliament would have to approve any financial-aid package that the ESM grants another euro-zone country.
Some of the plaintiffs are veterans of legal challenges to Germany's pacts in Europe. The court has a history of allowing the German government to deepen Europe's political integration. But the judges have insisted on the rights of Germany's Parliament to have its say and to limit the country's European commitments.

By Susann Kreutzmann for Wall Street Journal