Rocky Vega

The EU had made progress. The German Chancellor had grudgingly relented, and had come to terms with transferring funds, along with the IMF, to Greece in order to help it work through its debt restructuring. For a while even the debt markets briefly acknowledged the movement toward a real solution… but no longer. Four German professors have requested a court injunction against the transfer, stating that it “violates the ‘no-bail-out’ clause of the EU Treaties.”

For more details we turn to The Daily Telegraph:

“Dr Karl Albrecht Schachtschneider, law professor at Nuremberg and author of the complaint, told The Daily Telegraph that he will be ready to file within days and will ask the court for an expedited procedure. A ruling could occur within a week, but may take as long as six months. The complaint will argue that the rescue contains an illegal rate subsidy, threatens monetary stability as encoded in the Maastricht Treaty, and breaches the ‘no bail-out’ clause. Greece is clearly responsible for its own mess.

“‘It is a question of law. The duty of the court to defend the German constitution. They have no choice other than reaching a lawful decision. This may cause a great crisis in Europe but we already have a crisis,’ he said. He will ask the court to freeze rescue aid while the case is pending. There is a precedent for this. It ordered Berlin to halt implementation of the Lisbon Treaty while it reviewed the treaty last year. Such a move would cause havoc on Europe’s bond markets.

“‘This court hearing is going to be very dangerous,’ said Hans Redeker, currency chief at BNP Paribas. ‘It could lead to Germany itself being catapulted out of the currency union. Once investors begin to fear this, there will not be single euro in further financing for the EMU periphery.’”

The timeline for a ruling, from a week to six months, and the possible fallout, ranging to “Germany itself being catapulted out of the currency union,” create a great deal of new uncertainty for the Greek crisis that so recently seemed on its way to resolution. The professors have the right idea, bailouts don’t help anyone. It creates moral hazard and, as they indicate, is just another example of governments throwing good money after bad.

Still it’s interesting that at this point, depending on how the ruling unfolds, there could be a complete unraveling of the euro. Other troubled euro countries like Portugal and Spain would also see their debt problems worsen severely. It certainly goes to show how the legal framework supporting the US dollar stands much stronger in contrast.

Visit The Daily Telegraph to read more about how Greek aid is in doubt.

Best,

Rocky Vega,
The Daily Reckoning

Rocky Vega

Rocky Vega is publisher of Agora Financial International, where he advances the growth of Agora Financial publishing enterprises outside of the US. Previously, he was publisher of The Daily Reckoning, and founding publisher of both UrbanTurf and RFID Update -- which he ran from Brazil, Chile, and Puerto Rico -- as well as associate publisher of FierceFinance. Rocky has an honors MS from the Stockholm School of Economics and an honors BA from Harvard University, where he served on the board of directors for Let?s Go Publications, Harvard Student Agencies, and The Harvard Advocate.

  • John Ryskamp

    How many lawyers participated in drafting this bailout? A lot. I’m sure THEY made sure it will survive this challenge. I’m not familiar enough with the law at issue, but do these professors have what in the U.S. is known as “standing” to sue. They certainly wouldn’t under American law.

    No, the real problem with the bailout is that it’s U.S. bailout-style looting. And Greece is a bottomless pit of bad debt.

    So are the other “countries” which are now going to line up. Still more looting on behalf of the oligarchy.

    Too bad we’ll have to get to 50% unemployment to have a revolution. And we’ll get that level of unemployment.

  • john

    Are you joking….Germany knocked out of the Euro? If Germany is knocked out of teh Euro, there is no more Euro.

Recent Articles

Extra!
6 Reasons You’ll Love Being a Late-Stage Investor

Matthew Milner

When investing in a private company, there are two kinds of investors: early-stage and later-stage. And while early-stage investors have more upside potential, they're also exposed to far more risk. Today, Matthew Milner explains how you can be a successful later-stage investor, and still make great gains, with much less risk. Read on...


Video
How to Predict an Economic Collapse

Kate Incontrera

In his recently released book, A Viennese Waltz Down Wall Street, Mark Skousen gives the Austrian School's take on what triggered the 2008 financial crisis - and why you should be wary of the artificial boom that's driving the recovery.


Laissez Faire
Why Heartbleed Will Change the Internet as You Know It

Mike Leahy

The Heartbleed bug is a massive security flaw that could put you and your personal information at risk. And while there are things you can do to limit the damage, you haven't yet seen the ramifications of this security disaster. The Internet in the post-Heartbleed world won't look like anything you've seen before. Mike Leahy explains...


Big Opportunity in the “Baby Bakken” Oil Field

Matt Insley

As the U.S. "shale gale" nears its 10th birthday, it appears the America energy renaissance has outlived its critics. Still, it's natural to wonder whether all the big gains are behind us. Today, Matt Insley reveals the newest shale hotspot, and explains why there's still plenty of opportunity left in the U.S. energy boom. Read on...


Maestro
The Real Reason the US Media Hates Vladimir Putin

Marc Faber

The U.S., Russia, the EU and Ukraine all met in Geneva, where all sides agreed to halt all violence and provocations in Ukraine. But the news media are still taking an antagonistic stance toward Vladimir Putin and Russia. What gives? Today, Marc Faber explains the hypocrisy behind U.S. foreign policy... and the BS the news media are pushing about it...