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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: pogohere who wrote (113184)	7/22/2010 12:32:18 AM
From: pogohere	Read Replies (2) \| Respond to of 116555

Legal noose tightens on Europe's monetary union – Telegraph Blogs Ambrose Evans-Pritchard July 8th, 2010 The plot continues to thicken at Germany’s constitutional court, a body with power of life or death over Europe’s monetary union. Contrary to general belief, Germany’s eurosceptic professors have not abandoned their legal efforts to block the EU rescues for European banks exposed to Greek debt, and since May 7 for banks exposed to debt from Spain, Portugal, and Ireland as well. 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. There are now four cases at the court – or Verfassungsgericht – arguing that these disguised bank bail-outs breach multiple clauses of EU treaty law, and therefore breach Germany’s supreme and sovereign Basic Law. . . . Meanwhile Germany’s Centre for European Politics in Freiburg – a free-market think tank – has joined the fray with a report arguing that the use of €60bn of EU money under Article 122 of the Lisbon Treaty to support the rescue package is illegal. This is a new twist and on the face of it looks unanswerable. Here is the link for German speakers: cep.eu “It is a complete violation of our constitutional law and the judges at the court will have to say so if a case reaches them, even though they are afraid of the economic consequences,” said the author, Dr Thiemo Jeck. The EU’s no-bailout clause from Article 125 says: “The Union shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of any Member State, without prejudice to mutual financial guarantees for the joint execution of a specific project. A Member State shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of another Member State, without prejudice to mutual financial guarantees for the joint execution of a specific project.” This does not necessarily prohibit EU states joining together voluntarily to rescue a country in trouble. However, it is another matter to use EU money itself for this purpose, even if it is possible where “a Member State is in difficulties or is seriously threatened with severe difficulties caused by exceptional occurrences beyond its control”. Did Greece got into trouble for reasons “beyond its control”. Obviously not. . . . The Verfassungsgericht stated that the sovereign states are “Masters of the Treaties” and not the other way round. They said national parliaments are the only legitimate fora of democracy, and that the European Parliament is inherently undemocratic. This is correct. The court constructs a line of defence against any possible infringements of German sovereignty, stating that certain fields “must forever remain under German control” – including, of course, fiscal policy. In a sense, the Verfassungsericht has become the defender of democratic freedom and liberties for the whole of the European Union since other national courts are largely craven (Though not Ireland’s supreme court) and since the Hegelian ECJ has demonstrated in a series of key cases that it has no respect whatsoever for human rights and acts a mere enforcer of authoritarian power-grabs by the EU’s executive machinery. As such, the ECJ is a dangerous organization. My guess is that the Verfassungsgericht will spin out these cases for a while, hoping that the immediate crisis will pass. The crisis will not pass because EMU’s North-South split is inherent in the system and cannot be bridged. At some point the court will find itself forced to rule. It may well deem elements of the rescue to package to be unconstitutional – though not all of it – and order Berlin to go back to the drawing board. If that happens, you do not want to be left holding Club Med bonds or currencies (plural). blogs.telegraph.co.uk