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

Why the Fed Will Launch Another Round of QE

Richard Duncan

Ben Bernanke introduced the world to the concept of "quantitative easing" back in 2002. It was an "unorthodox plan" to save the economy from the horrors of deflation. But the monstrous economy it has actually created is in some ways far worse. And as Richard Duncan explains, it's not going to end any time soon. Read on..


How to Safeguard Your Digital Currency

Dominic Frisby

While the technical details of Bitcoin may intimidate the novice, they shouldn’t keep him from getting in on a digital currency revolution that -- while taking different forms -- isn’t going away. How do you get the simplest, easiest-to-act-on tips about how to invest, safeguard and grow your digital wealth? Dominic Frisby has more…


Solar to Save the World, Ebola to Maim it

Chris Campbell

The duality is stark. In one hand, we have an energy renaissance underway, in the other, a virus is threatening to wreak havoc on the markets and, potentially, your life. Nothing we’re currently doing to fight the Ebola virus will work in 2014, say the researchers. Nothing we’re currently doing will beat it in 2015, either. We need a new game-plan. Read on…


How to Profit From the “Cycle of Hype”

Greg Guenthner

Lose your shirt in 3D printing stocks this year? Don’t kick yourself. You’re not alone. (Okay, kick yourself a little if it’ll make you feel better.) You need to make sure you don’t lose your 3D-printed shirt in the next tech craze. Because there will be a next time. Look, it’s really not your fault if you got taken for a ride on 3D stocks. Greg Guenthner has more...