Brussels, 16/07/2012 (Agence Europe) - On Monday 16 July 2012, the Karlsruhe Constitutional Court in Germany said that it will be deciding on 12 September 2012 on the appeal by German left group Die Linke against the law to introduce the Budget Pact and the ESM (see EUROPE 10640). Italy is unhappy about the new delay. The European Stability Mechanism will replace the EFSF as the eurozone bailout fund and is supposed to come on stream this month, but has not yet been ratified by enough countries.
Italy's credit rating was downgraded by Moody's on Thursday 12 July 2012 (see EUROPE 10655), and the country is suffering from speculation on the money markets and interest rates fluctuating at times to unbearably high levels. Italian Prime Minister Mario Monti has called several times for an anti-spread buffer to be set up to counter interest rate hikes (see EUROPE 10644). Italy will be calling at the 20 July Eurogroup for a speedy introduction of the anti-spread buffer which already exists, but until the ESM comes into force, it will rely solely on the EFSF, which is beginning to run out of cash. Much of its initial funding of €440 billion has been used to bail out Greece, Ireland, Portugal and (in the near future) Spain.
Italy's debt stands at €1,966 billion, 123% of GDP. On Tuesday 10 July 2012, Mario Monti broached the issue of asking the eurozone for financial aid. Leonardo Domenici, Italian S&D MEP and rapporteur on reform of credit rating agencies, says that this summer will be tough and Italy might suffer from even greater speculation. If he is right, then Italy might find it difficult to roll over its debt on the money markets. The country is expected to ratify the ESM and the Budget Pact on 19 July. (EL/FG/transl.fl)