2010-06-06

Schnapsideen kaputt, Torschlusspanik beginnt

I haven't written about the constitutional challenge in Germany on this blog, but now it's in the news. From the beginning of the euro crisis, Germany has been the key nation because their of their economic and financial position in the EU, they are the most financially prudent and the euro system requires unanimity. Immediately upon the bailout agreement passing the German parliament, some college professors filed a lawsuit (prepared weeks earlier) in their highest court challenging the constitutionality of the bill because the German constitution forbids bailouts of other nations.

Here's Der Spiegel reporting than an interim order, which appears to be similar to an injuction in the U.S., could sink the bailout.
Karlsruhe checks-euro rescue (Google translation)
The Federal Constitutional Court, order against the euro rescue to adopt an interim measure. This would allow the court provisionally prohibit the federal government to guarantee loans to enable the German. Against the rescue package are constitutional complaints against several.

Karlsruhe - The test has triggered a constitutional complaint of the MPs Peter Gauweiler (CSU). The President of the Constitutional Court, Andreas Voßkuhle had to Gauweiler complaint, according to information of the SPIEGEL explicitly asked for opinions of different jobs: He led them to the Federal Government, the Bundestag, the Federal President, all state governments, the European Central Bank and the German Bundesbank and asked for feedback. It is Voßkule a request for interim relief, the Gauweiler associated with its application has. Gauweiler has brought in Karlsruhe already against the Treaty of Lisbon complaint. Disturb him, "that is further given unchecked power to EU bodies.

The Federal Government has now responded to SPIEGEL information, fared if the interim order, this could be a "pull self-fulfilling expectation of a payment default" EU countries to be vulnerable. Also stressed the government, instead of the Member States in Brussels adopted the euro rescue pact is "not a legally binding international agreement, but merely a political statement."
The euro bailout package includes an escape clause, as Ambrose Evans-Pritchard detailed in Double-dip fears over worldwide credit stress.
Markets have been rattled by reports in the German media that the Greek rescue deal contains two secret clauses. The package will be "immediately and irrevocably cancelled" if it is found to breach the EU Treaty's "no bail-out" clause, either in a ruling by the European court or the constitutional courts of any eurozone state. While such an event is unlikely, it is not impossible. There are two cases already pending at Germany's top court in Karlsruhe, perhaps Europe's most "eurosceptic" tribunal.

The second clause said that if any country finds it cannot raise funding for the rescue at interest rates below the 5pc charge agreed for Greece, it may opt out of the bail-out. BNP Paribas said this would escalate quickly into a systemic crisis if Spain were in such a position, because the other countries cannot carry an ever-rising burden. The bank warned the euro project itself may start to disintegrate rapidly if these rescue provisions are ever seriously put to the test.
Notice that the case in Karlsruhe is the court in the Der Spiegel article. The second clause is also important because if the bailout is in question, the bonds of the weaker eurozone countries could drop and yields could rise above 5%, which would allow them to exit the agreement. With the euro losing ground on the news from the German court, who knows what Monday will bring.

Here's a link to the original German.
Karlsruhe prüft Euro-Rettung

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