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.
Rocky Vega,The Daily Reckoning
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.
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.
Are you joking….Germany knocked out of the Euro? If Germany is knocked out of teh Euro, there is no more Euro.
The US Social Security program is complete mess. The funds needed to pay these benefits are quickly drying up, and agreeable solutions are in short supply. But all is not lost... There actually IS a viable way to "save" Social Security. But as Dave Gonigam explains, you're probably not going to like it. Read on...
This summer, the worst Ebola outbreak ever recorded hit sub-Saharan Africa. But the greatest danger, as Stephen Petranek explains, is that the virus will have a chance to mutate into a form that spreads more easily. And if that happens, there will be far reaching consequences - from both a health and an investment side. Read on...
Everyone in the world has a unique talent or skill that someone else might find useful. Whether it's editing video, speaking Spanish or even eating paper, chances are there is someone out there willing to pay for what you have to offer. Today, Chris Campbell shows you one way to find those consumers and how to make your skill work for you...
For the last few years, gun enthusiasts have been concerned that the Feds would find a way to block their access to firearms. Now those fears appear to be subsiding... and so do gun sales. Greg Guenthner explains how to navigate this market in the coming months and years. Read on...
The gold mining sector is one of the most difficult areas of the market to navigate successfully. But there is money to be made here. Henry Bonner sits down with one of the giants of this industry and picks his brain about how to find winners in this market and the four things every great investment has in common. Read on...