Gauweiler's Challenge to Germany's Constitutional Court: Fiscal offenders or victims of nature?

Several law-suits have been launched at Germany's Constitutional Court with the aim of stopping the Euro-area bail-out. This bail-out has been put in place by the Euro-area governments – as you may recall – based on a passage in the Lisbon treaty that allows for member nations to come to the aid of other nations that have been stricken by a natural catastrophe or 'exceptional occurrences beyond their control'.


Natural catastrophes, properly defined, are things like earthquakes, unexpected volcanic eruptions, tsunamis, especially heavy storms (think hurricanes) or asteroid impacts of a certain size.

Economic downturns, contrary to the Keynesian view, are not natural catastrophes that strike us unbidden. They are the entirely predictable result of unsustainable booms based on credit expansion.

The bust is the end result of the man-made boom. It should be fairly obvious that without a money supply and credit expansion, no boom would  be possible. Economic growth, even very strong economic growth, would of course still be possible, but it would be properly funded by real savings and thus could not lead to a major bust.

Note that we are not attempting to argue here that a stable money supply would make entrepreneurial error impossible. There will always be a certain modicum of entrepreneurial error, even under the best of circumstances.

However, large-scale errors such as the wide-spread malinvestment of capital that an inflation of fiduciary media fosters would not occur, as the information about consumer time preferences embedded in the interest rates charged in the loanable funds market would reflect reality – this is to say, it would be fairly clear to most people which economic activities  can be funded and which can not be funded.

We can firmly conclude that economic busts are not akin to 'natural disasters'. This alone makes the bail-out package highly questionable from a legal standpoint – as it was deliberately designed to get around the explicit prohibition of financial help to Euro-area members, which is part of the EU's treaties regarding the currency union – precisely because there should be no possibility for member nations to skirt their obligations with regards to fiscal prudence.



Example for natural catastrophe creating exceptional circumstances beyond anyone's control: eruption of volcano.

(Graphics credit: Elaine Meinel Supkis)



Another example for 'exceptional circumstances beyond anyone's control': the asteroid strike.

(Graphics credit: NASA)



Germany's Constitutional Court in a Bind

To get back to the court challenges, many people in Germany have been unhappy about the Euro experiment from the very beginning.

They argued, quite reasonably, that it would likely be impossible to create a common currency as reliable and strong as the Deutschmark used to be, and that sooner or later, Germany would pay a steep price for entering into such a currency union with the serial offenders to fiscal and monetary prudence generally bordering the Mediterranean Sea. Consequently a court challenge was launched, attempting to derail the Euro project before it could even get off the ground.

This was evidently not successful, which is not at all surprising.  At the time, the long bull market/stock market mania was still in full swing. It was an era of improving social mood, a 'feel-good era' not unlike the 'roaring 20's'. During such times, harmony and unity are concepts that gain a lot of currency as it were.

Monetary unions like the Euro  can only come about in this kind of environment, where nothing seems impossible and optimism about the future is boundless, as it always tends to be when great booms are entering their final lap.

The Constitutional Court at the time rebuffed the challenge, a 300 pages thick suit that was brought by four 'Euro-skeptic' law and economics professors, Karl Albrecht Schachtschneider, Wilhelm Nölling, Wilhelm Hankel and Joachim Starbatty.

At the time, no other outcome was expected, in spite of the fact that many had to admit that the arguments brought by the four plaintiffs were 'sound in principle'. It has now turned out that they were actually right. In fact, they were almost 100% correct in their assessment of the likely economic outcome.

Their complaint about the inherently undemocratic nature of the Euro-area's arrangements, the fact that they would inevitably lead to a dilution of national sovereignty and thus a diminution of the say citizens had in their affairs nowadays sounds rather prescient as well (this is about 230,000 additional EU regulations later, mind).

Consequently, the Constitutional Court in Karlsruhe now finds itself in something of a bind. The same four plaintiffs are at it again, attempting to derail the bail-out, and have by now been joined by several others, the latest of which is the conservative CSU (Christian Social Union) politician Peter Gauweiler from Bavaria.


The court is in a bind because:


1.    The plaintiffs of 1998 have proved to have been substantially correct in their assertions made over a decade ago.

2.    The social mood has clearly changed – from the widespread embrace of the 'European Project' to distrust and skepticism – so much so that every politician probably knows by now that if the Euro were made the subject of a plebiscite there's a very good chance it would be rejected.

3.    In view of the gigantic amounts of money involved in the bail-out, a wrong decision could have consequences for the court itself, which must be seen as an independent adjudicator of constitutional law, and not just a provider of judicial fig leafs for the establishment.

4.    The legal basis of the bail-out decision is more than just wobbly. As mentioned above, this is not a natural catastrophe we are dealing with here. And yet, this is precisely what the EU's politicians and bureaucrats have declared it is.

5.    The entire affair points to a planned further erosion of the national sovereignty of Euro-area member states. Specifically, the debate over the 'ceding of economic/fiscal sovereignty' has been revived. This however would likely contradict the Court's decisions with regards to the Lisbon treaty.


As we have mentioned in 'The Euro-area Debt Crisis – the Bail-out Update': “Note also that the politicians have not asked the producers of wealth if they are giving permission for this cross-border theft. It has been presented as a fait accompli, and that's that.”


That was, and remains, the real problem.



Gauweiler the Maverick

Peter Gauweiler is a fairly mainstream conservative politician, quite a typical Bavarian politician in many ways in fact – except when he isn't. Occasionally he takes positions against the establishment that make quite a few waves.

A few examples: he was the first conservative German politician to take the position that the planned invasion of Iraq was illegal and based on lies (as he actually put it 'untruths' and 'in violation of international law') and should therefore be firmly rejected. He held a similar position on the Nato war in Kosovo.

He took the position that German Tornado fighters should not be used in Afghanistan, and attempted to stop their use via a Constitutional Court challenge (at this point you already have to like the man. He is anti-war, and specifically, anti illegal war. This tells us he is pro civilization and peace).

He was one of the first to announce that he didn't care whether German works of art that had basically ended up as plunder in the Soviet Union after WW2 remained in Russia.

He voted against the government 'stockpiling' data on citizens. In addition,  he took action against the treaty of Lisbon, once again via a suit brought at the Constitutional Court. 

This law-suit was important because it was in part successful. The court issued instructions to the government aimed at ensuring that the Lisbon treaty's terms would not interfere with sovereign democratic control. In essence, while the German government may still delegate certain decisions to European institutions like the European parliament and the  EU Council of Ministers, it has to ensure that the constitutional prerogatives of the states making up the German federation are in no way injured by such delegation.

In this light, Gauweiler's latest attempt to stop the bail-out package must be taken seriously. He doesn't just launch frivolous suits for show or the sheer heck of it. He really means it, and he undertakes a fair amount of research before filing suit.

He probably wouldn't file a suit that has no chance of succeeding at all. Germany's parliament has in the meantime already decided – across political party lines, which once again shows that in certain questions, such as bailing out of insolvent banks on the backs of taxpayers, the establishment is of one mind  –  that Germany will offer some € 148 billion as its contribution to the bail-out package.

Right after the IMF's contribution, this is the second largest (natch). Gauweiler now has filed motion for a temporary restraining order with the court in Karlsruhe, until the broader constitutional questions and challenges to the package have been debated by the court.

As mentioned above, this recent barrage of suits brought by eminent legal scholars, high profile economists and  now the equally high profile political maverick Gauweiler, is not something the court can easily brush off. In reaction, the court has sent out a number of rather embarrassing letters to all concerned – the German government, the President (who quickly and surprisingly resigned before he could put his signature on the bail-out package) the ECB, the German Bundestag (parliament), the Landesregierungen (state governments), and the Bundesbank,  to ask for comments.

Parts of the federal government's 38 pages long (!) statement to the court have become publicly known.

As the  German language issue of the Financial Times reports:


“Gauweilers Rechtsvertreter Dietrich Murswiek bestätigte Berichte, nach denen die Bundesregierung in ihrer Antwort an Voßkuhle im Falle einer einstweiligen Verfügung gegen den Euro-Rettungsschirm vor einer "sich selbst erfüllenden Erwartung auf einen Zahlungsausfall" warnt. Eine Pleite Griechenlands und anderer Euro-Länder hätte demnach unabsehbare Folgen für die Gemeinschaftswährung und die Wirtschaft in der Europäischen Union.”



“Gauweiler's attorney Dietrich Murswiek confirmed reports according to which the Federal Government had warned in its statement to the court that “a temporary injunction against the Euro bail-out package (the German term 'Rettungschirm' means literally 'emergency parachute') would lead to a self-fulfilling expectation of default.” A default by Greece and other Euro-area member nations would therefore have incalculable consequences for the common currency and the economy of the European Union”


and further – this is where it gets really interesting:


“In dem 38 Seiten langen Schreiben der Bundesregierung werde unter anderem erklärt, der Euro-Rettungspakt stelle keine rechtsverbindliche völkerrechtliche Vereinbarung, sondern nur eine politische Absichtserklärung dar, sagte Murswiek. Nach Einschätzung Gauweilers ist dies von Belang, denn nur die Unverbindlichkeit ermögliche es, die Bürgschaften noch zu stoppen. Der CSU-Politiker zeigte sich zuversichtlich, im Hauptsacheverfahren Recht zu bekommen. Die Chancen für eine einstweilige Verfügung wollten dagegen weder er noch sein Anwalt beurteilen.”



“In the 38 pages long letter by the Federal Government it is inter alia stated that the Euro bail-out package did not constitute an accord unter international law, but merely a political declaration of intent, said Murswiek. According to Gauweiler's assessment this is of importance, since the non-binding nature of such a declaration made it possible to still stop the payment guarantees. The CSU politician appeared confident that he would prevail in the main proceedings. The chances of success for the getting a temporary injunction neither he nor his attorney wished to judge.”


We can be fairly certain that the Constitutional Court will in the end attempt to arrive at some sort of compromise, just as it did in the case of the Lisbon treaty. It can not very well simply ignore the questionable constitutionality of the  bail-out.

The many letters to the involved bureaucracies for comment are among other things surely meant to create a fig leaf for the court to fall back on – to broaden the number of institutions and people ultimately taking responsibility.

The Court is in an unenviable situation, because regardless of how it decides, it could very well later turn out to have been the wrong decision (as already demonstrated by the original anti-Euro introduction suit by the four professors – who had predicted a certain outcome if the Euro were adopted, and have been proved right as exactly this outcome has now occurred).

We can not dismiss the possibility that the Court finds the bail-out package such as it stands unconstitutional. In this case the bail-out can not proceed without Germany's parliament actually amending the German constitution. Good luck with that one.



Trying to save the German tax-payer: the bane of the Eurocrats, Peter Gauweiler.

(Photo credit : DPA)



Emigrate While You Can... Learn More



Dear Readers!

It is that time of the year again – our semi-annual funding drive begins today. Give us a little hand in offsetting the costs of running this blog, as advertising revenue alone is insufficient. You can help us reach our modest funding goal by donating either via paypal or bitcoin. Those of you who have made a ton of money based on some of the things we have said in these pages (we actually made a few good calls lately!), please feel free to up your donations accordingly (we are sorry if you have followed one of our bad calls. This is of course your own fault). Other than that, we can only repeat that donations to this site are apt to secure many benefits. These range from sound sleep, to children including you in their songs, to the potential of obtaining privileges in the afterlife (the latter cannot be guaranteed, but it seems highly likely). As always, we are greatly honored by your readership and hope that our special mixture of entertainment and education is adding a little value to your life!


Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke


Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • 5-cotmmrangegc03Ganging Up on Gold
      So Far a Normal Correction In last week's update on the gold sector, we mentioned that there was a lot of negative sentiment detectable on an anecdotal basis. From a positioning perspective only the commitments of traders still appeared a bit stretched though, while from a technical perspective we felt that a pullback to the 200-day moving average in both gold and gold stocks shouldn't be regarded as anything but a normal - and in this case actually long overdue -...
  • gold_bullionGold Sector Correction – Where Do Things Stand?
      Sentiment and Positioning When we last discussed the gold sector correction (which had only just begun at the time), we mentioned we would update sentiment and positioning data on occasion. For a while, not much changed in these indicators, but as one would expect, last week's sharp sell-off did in fact move the needle a bit.   Gold - just as nice to look at as it always is, but slightly cheaper since last week. Photo via The Times Of India   The commitments of...
  • wryAustralian property bubble on a scale like no other
      Australian property bubble on a scale like no other Yesterday Citi produced a new index which pinned the Australian property bubble at 16 year highs:   Bubble trouble. Whether we label them bubbles, the Australian economy has experienced a series of developments that potentially could have the economy lurching from boom to bust and back. In recent years these have included:    the record run up in commodity prices and subsequent correction;  the associated...
  • "What if we don't change at all ... and something magical just happens?"Prepare for the Unthinkable
      Red Ink Growth and profits mask a variety of problems.  They hide business inefficiencies and the money suck of corporate adminis-trivia.  They also conceal unproductive staff.   The final career leap   But most of all growth and profits obscure the extreme value subtracting forces of bloated management teams.  During good times it is unclear what these smug fellows do.  During bad times it is lucidly clear that most of them ain’t worth a darn. When the...
  • andy-duncan-and-claudio-grassA Looming Banking Crisis – Is a Perfect Storm About to Hit?
      Andy Duncan Interviews Claudio Grass Andy Duncan of has interviewed our friend Claudio Grass, managing director of Global Gold in Switzerland. Below is a transcript excerpting the main parts of the first section of the interview on the problems in the European banking system and what measures might be taken if push were to come to shove.   Andy Duncan of (left) and Claudio Grass of Global Gold (right)   Andy Duncan: How do you see the...
  • spankinggoodtimeUS Stock Market - a Spanking May be on its Way
      Iffy Looking Charts The stock market has held up quite well this year in the face of numerous developments that are usually regarded as negative (from declining earnings, to the Brexit, to a US presidential election that leaves a lot to be desired, to put it mildly). Of course, the market is never driven by the news – it is exactly the other way around. It is the market that actually writes the news. It may finally be time for a spanking though.   Time for some old-fashioned...
  • www-usnewsLove him or Hate him: Trump is the Revolution Against the Establishment
      The U.S. Elections: The Latest Crack in the System The 2016 U.S. presidential elections are unprecedented: I don’t believe we have ever witnessed before a campaign year so toxic, so dangerously divisive and full of ad hominem attacks. Both camps have vilified the opposition and their followers, creating a schism in society. There has been no rational dialogue on the issues that truly concern the American public.   The schism Illustration by : M. C....
  • larry-1Meet Your New Stimulus Allocation Czar
      March Towards Midnight The march towards midnight is both stirring and foreboding.  Like a death row inmate sitting down to savor his last meal, a grim excitement greets the reality of impending doom.  Thoughts of imminent mortality haunt each bite.   Tic-toc, tic-toc...   As far as the economy’s concerned, there’s no stopping its march towards midnight.  The witching hour’s rapidly approaching.  We intend to savor each moment and make the best of...
  • chairman-tienanmen-square-beijingDonald is Right – The System is Rigged
      Scams and Flimflams BALTIMORE – For weeks, the top news headlines have been about politics. And politics has been all about the Republican Party candidate for president of the United States, Donald Trump.   Two very different elections...   The Establishment, the media, and most right-thinking people look around and sniff the air. Something stinks. And the smell, they say, is coming from that skunk, Trump. Meanwhile, Hillary, all greased up with expensive...
  • state_police_980_600_s_c1_t_c_0_0_1Are the Deep State’s Drones Coming for You?
      What’s Aleppo?   Look out kid Don’t matter what you did Walk on your tip toes Don’t try "No Doz" Better stay away from those That carry around a fire hose Keep a clean nose Watch the plain clothes You don’t need a weather man To know which way the wind blows – “Subterranean Homesick Blues,” Bob Dylan   The entrance to Baghdad's “Green Zone”. Photo credit: Karim Kadim / AP   DELRAY BEACH, Florida – Biggest foreign policy blunder...
  • speculatorInterview with Doug Casey
      Natalie Vein of BFI speaks with Doug Casey   Our friend Natalie Vein recently had the opportunity to conduct an extensive interview with Doug Casey for BFI, the  parent company of Global Gold. Based on his decades-long experience in investing and his many travels, he shares his views on the state of the world economy, his outlook on critical political developments in the US and in Europe, as well as his investment insights and his approach to gold, as part of a viable strategy for...
  • where-to-goThe Bamboozled Middle Class
      Gassy and Bloated BALTIMORE – What a great time for an observer with a sense of mischief! This year’s presidential campaign is the most absurd and remarkable we have ever witnessed. After more than two centuries, Americans are finally getting the democracy they deserve – one that is grotesque... slimy... and immensely entertaining, albeit in the mud-wrasslin’ genre.   The mud-wrestlers – well, we did promise you in these pages it would be entertaining like never...

Austrian Theory and Investment

Support Acting Man

Own physical gold and silver outside a bank




Realtime Charts


Gold in USD:

[Most Recent Quotes from]



Gold in EUR:

[Most Recent Quotes from]



Silver in USD:

[Most Recent Quotes from]



Platinum in USD:

[Most Recent Quotes from]



USD - Index:

[Most Recent USD from]


THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Buy Silver Now!
Buy Gold Now!