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

Attack on America’s Most Important Pipeline

Byron King

America's most precious resource isn't oil, natural gas, gold or any other commodity. But it travels through an extensive pipeline that, if severed, could signal an unprecedented breach in U.S. security. What is this pipeline, and why is it so imperative that the U.S. take steps to protect it? Byron King explains...


3 Critical Correction Warnings

Greg Guenthner

The S&P 500 just clocked a new closing high last week, while the Dow and the Nasdaq both fell just short or their previous highs. But under the surface, you'll find a few bits of evidence pointing toward lower prices. And right now, there are seeing several warning signs that could point to market weakness. Greg Guenthner explains...


Extra!
Where You Can Make $56,000 a Year Delivering Pizzas

Jim Mosquera

US unemployment rates are some of the most dubious and debatable numbers in economics. And when you look at how the government fudges them it's easy to see why. Today Jim Mosquera attempts to make sense of them, and includes an insightful commentary on another controversial topic: minimum wage. Read on...


Addison Wiggin
The Quickest, Easiest Way to Store Your Wealth Overseas

Addison Wiggin

Over the years, the feds have made it increasingly difficult for you to maintain any semblance of financial freedom. So today, Addison Wiggin details one strategy that will go a long way to keeping them at bay, and allow you to keep more of your hard-earned money in the process. Read on...


The Next Phase of Gold Profits is About to Begin

Frank Holmes

Today Frank Holmes shows how tracking the past history of the Federal Reserve's Funds Rate Cycle can be a powerful prediction tool for gold investors. Specifically, he points out why this is the beginning of a period in the cycle that's historically favorable for the price of gold, and how you can take advantage of it. Read on...