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Wednesday, December 28, 2011 11:31 AM


"It's a Mistake To Pursue a United States of Europe" says German Supreme Court Justice in Spiegel Interview ; Interpretation of Interview from Saxo Bank Chief Economist


Those looking for a reason for a sinking Euro and falling stock markets today just may find the answer in a Spiegel Interview with German Constitutional Court Judge Udo Di Fabio who says "It's a Mistake To Pursue a United States of Europe".

SPIEGEL: Didn't the court's decision on the Lisbon Treaty in effect place strict limits on further European integration by banning the transfer of important political powers from Germany to the EU?

Di Fabio: The decision on the Lisbon Treaty pinpoints the sensitive areas, such as budgetary autonomy. Furthermore, in the euro-zone bailout ruling, issued on Sept. 7 of this year, the court made it clear once again that this particularly concerns the parliament's power of disposition over revenue and expenditure.

SPIEGEL: But this is precisely the aim of the fiscal union to control the debt crisis. If the national budget falls under the control of the European Commission, the next Constitutional Court veto will be just around the corner.

Di Fabio: Not necessarily. Since no politician really intends to transfer their power of disposition over the substance of the national budget at an EU level, there is no insurmountable obstacle.

SPIEGEL: Does it concern the substance when a Brussels fiscal commissioner says to the German parliament, the Bundestag: You're not allowed to pass this budget?

Di Fabio: If Brussels only more closely supervises whether the member states are adhering to the agreements that they have concluded, then this does not constitute an infringement on their identity. Anyone who voluntarily agrees to something has to accept that they will be checked to ensure that this contractual obligation is fulfilled. Such a veto could come from Karlsruhe, however, if there were a violation of the new debt brake (an amendment to Germany's constitution that requires the government to balance its budget each year by 2016).

SPIEGEL: The president of the European Court of Justice in Luxembourg nonetheless recently said that he's not happy to hear that Karlsruhe wants to have the last word.

Di Fabio: I'm also unhappy to hear certain things, but I accept them.

SPIEGEL: How long can this really work, this coexistence of authorities to adjudicate in Europe?

Di Fabio: As long as we don't have a United States of Europe, we will continue to have a polity that has a certain network character.

SPIEGEL: Wouldn't it be easier to form a democratic United States of Europe with separation of powers?

Di Fabio: I think it is a mistake to pursue a United States of Europe model. There is no ideal solution on earth, nor is there one that dates back to the 19th century. The supposed universal remedy of a United States of Europe could cause even greater conflicts than the current union with its many weights and counterweights that allow for a balance.
Interpretation From Saxo Bank

Via email Steek Jakobsen, chief economist for Saxo Bank in Denmark writes ...
This was a very open and interesting interview. The “killer stuff” is in the late part of the interview. Here are my notes:

  • Di Fabio does not see Constitutional Court and Basic Law as Euro unfriendly, actually states the opposite
  • Euro-bonds are “illegal” in his view (p.5 top)
  • Wrong to pursue United States of Europe – you need intra- government coordination but also strong individual states – not one without the other
  • No state can save the world on its own!
  • Europe…a “security construction” – (the good old excuse for slow non-working EU)
  • EY SENTENCE (p.2 top) : “….. Anyone who voluntarily agrees to something has to accept they will be checked to ensure that this contractual obligation is fulfilled. Such a veto could come from Karlsruhe, however, were a violation of the new debt brake (an amendment to Germany’s constitution that requires the government to balance its budget each year by 2016!)

The last sentence – extremely critical – I must admit I did not know this. However, knowing this, Germany’s position makes sense! – They need “order” before anything and it also makes their compromise with France less “solid” as this exercise of buying time will end by 2012/13 – where they need to “structurally” get their budget down.

Germany looks to have weak growth in 2012 – and government is spending more money not tightening. However, Germany CAN’T stimulate when they need to be at ZERO deficit by 2016.

NOTE to ALL politicians – this is major, major, major statement – the new RULE is to BALANCE by LAW your fiscal imbalances.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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