Why the European Union Could be Dead Within a Week
Sep 01, 2011
The clock may be ticking on the future of the European Union (EU).
After being shaken to its core by the sovereign debt crisis, the entire Eurozone now runs the risk of blowing up within a week.
Germany’s highest court, the German Federal Constitutional Court, on Sept. 7 rules on the legality of German participation in the euro rescue fund that was established to bail out Greece.
If the court rules that Berlin’s commitment to the European Financial Stability Facility (EFSF) goes against EU law, or worse, against the German constitution, the entire Eurozone could collapse.
Think of the Eurozone as a minefield full of bombs that have long lay dormant, but are all still very active. Now, Germany’s court ruling – itself a single bomb timed to go off next Wednesday – could ignite a massive chain reaction.
Germany: The Eurozone’s Bomb Squad
Peripheral Eurozone countries like Portugal, Ireland, Greece, Spain, and Italy (the PIIGS) are in serious trouble and European banks face monumental liquidity and balance sheet issues.
So far, only Germany’s singular fiscal conservativism and economic strength have kept the EU from self-destructing. But now the Eurozone’s only legitimate bomb squad may be hanging up its lead-suits, pliers, and contagion containers.
What’s at issue for the Constitutional Court is whether Berlin broke the EU’s Maastricht Treaty, which unequivocally stipulates that member states cannot assume each other’s debts. And, more germane to German citizens and the center-right coalition government, will be the Court’s ruling on whether German Chancellor Angela Merkel’s decision to fund the bailout facility circumvented constitutional requirements to put such fiscal matters before the German parliament.
And while the court isn’t ruling directly on the EU’s currency – or Merkel’s support of it – the decisions rendered will have consequences for the euro’s future and by extension, the EU as a whole.
All of Europe’s time bombs have been temporarily defused by Germany’s aggressive support of the euro, and the Chancellor’s vociferous demands that all of the EU’s sovereigns come to the rescue of its ailing members, for the good of the continent.