11 July 2010

The attack of the German professors

Most Americans, if they have been following the story of the European Union's economic crisis at all, assume that the problem has pretty much gone away thanks to the bail-out of Greece and the establishment of a currency stabilization fund, both financed mostly by Germany, the biggest and richest country in the EU (I discussed this here). Not necessarily so.

A group of five German professors have filed a series of cases before their country's Bundesverfassungsgericht ("Federal Constitutional Court", the equivalent of our Supreme Court) claiming that the bail-out violates crucial EU treaties and the German Constitution, and must therefore be stopped. British commentator Ambrose Evans-Pritchard explains the situation here, noting that:

Should they succeed, of course, the eurozone risks disintegration within days, and perhaps hours. I am not sure that investors in New York, London, Tokyo, Beijing, or indeed Frankfurt quite understand this.

For a sample of the professors' views, see this 2005 interview in English with one of them, Dr. Wilhelm Hankel, on why the euro currency is unsustainable.

In most countries, a court ruling against the bail-out would amount to little more than a speed bump; the government would simply fudge some kind of work-around enabling it to press on with what it had decided to do anyway. But in Germany, the spectacle of a flagrantly unconstitutional abuse of power by the Chancellor would evoke memories of a certain, shall we say, uncomfortable precedent. The fact that the bail-out is massively unpopular with German voters would also carry some weight.

So Germany bears watching. America is not the only place where a high court's ruling can change the course of history.


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