A Disgrace

You don't need any more evidence than today's Telegraph editorial of the deeply corrupting nature of our membership of the EU. While pretending to be Eurosceptic, like all newspapers (with the suspect exception of the Daily Express) it supports our membership. And look what that contradictory (and bollocks) position of 'in Europe but not ruled by it' does with regard to the Euro:

The Germans are, for historical reasons, desperate to avoid again being placed in a central role at the heart of Europe. But circumstances have conspired to bring this about. Paradoxically, a European Union established to dissipate German power has enhanced it once more. And yet, perhaps because their own economy has performed exceptionally well, the Germans will not face up to their responsibilities. As a modern-day European diplomat, Radek Sikorski, the Polish foreign minister, said this week: “I fear German power less than I am beginning to fear its inactivity.” For a Pole, that was a remarkable statement. The Germans should listen, and act.

Desperate to maintain the Euro, what the Telegraph is advocating here is, not only a German dominated Europe, but the destruction of democracy across Europe including in Germany. Will German voters have a say in a undemocratic fiscal union that the Telegraph is essentially proposing? Or any other European countries for that matter? This...from a British newspaper.

The deepest irony is that the Euro crisis exists because the German Constitutional Court is upholding the basics of democracy and refusing to let Merkel throw it away on a whim just to prop up the Euro.

So in short the Telegraph wants Germany to throw away Europe's democracy for the sake of the EU and then it will viciously condemn it for doing so.

What a disgrace.

Last Man Standing

Contagion contagion everywhere; Spain is being hit with ever higher borrowing costs, so has Belgium, and Italy - bond yields which are again above the 7% level - and Portugal and so on. The markets have already assumed that France will lose its treasured AAA status. Then this morning contagion has hit the last man standing - the benchmark - Germany. 'A disaster' is what the German bond auction is being called (my emphasis):

LONDON, Nov 23 (Reuters) - German government bonds fell sharply on Wednesday after investors shunned the country's auction of new 10-year debt, signalling that the fast-spreading euro zone crisis was eroding the safe haven status of German debt.

Germany drew significantly less [sic] bids than the amount on offer for its Bunds, with investors deterred by very low yields. The euro zone powerhouse was caught between the best and worst possible scenarios on the euro zone crisis.

"It is a complete and utter disaster," said Marc Ostwald, strategist at Monument Securities in London. "If Germany can only manage a 0.65 cover in actual terms for what is going to be their next benchmark then what hope for everybody else?"

"It really tells you that the Bund yields are at the completely wrong level ... never mind that they are a safe haven. There's certainly a partial element of 'they (investors)would rather not have euros' in there."

The decisions by Germany are essential to the survival or otherwise of the Euro. As argued before on this blog, Germany faces an impossible position; it wants the survival of the Euro but is unable to take the steps necessary to ensure this. In a great piece Acting Man calls it An Intractable Problem.

The EU of course is arguing for more integration via Eurobonds as a solution:

The EC is launching a consultation to assess if the 17 eurozone countries can issue the bonds to raise cash.

Mr Barroso's 'stability bonds' plan would see much more investigation and control of the budgets of countries within the eurozone, to avoid a repeat of the bailouts and crises affecting the region.

But the EU must know that this would be illegal under German Constitutional Court rulings, it makes one wonder whether not only is this the last desperate throw of the dice for more integration but the laying of the groundwork for the blame game when it all goes pear shaped - that it was Germany's fault for not listening to the EC and its 'messiah' Barroso. The collapse of the Euro will cause enormous political ramifications and fallout.

The Financial Times has interesting piece that the markets have effectively 'smoked out' a stealth operation by the Bundesbank to try to control the German bond market, which spectacularly failed this morning:

That, alongside the fact that the Bundesbank is retaining an ever greater share of bonds from auction, suggests only one thing to the logical mind. It is the Bundesbank which is cornering the bund market on purpose. And it’s doing so to ensure that the one last repo rate in Europe that can be controlled remains suppressed.

The rate is important to suppress because almost all interbank funding is now done on a secured basis against the best quality collateral. Which implies two important points: 1) that the ECB itself has lost control and depends almost entirely on the Bundesbank to enforce its low rate policy target and 2) that the Bundesbank is having to retain more bunds from the market than ever before just to ensure the last functioning repo rate in Europe doesn’t spiral out of control.

That, we would say, is a big deal.

Whatever the case, Wednesday’s auction suggests the Bundesbank’s stealth operation has finally been outed. The question is, will the Bundesbank now be broken too?

One thing is for sure, though, now that Eurozone contagion has infected Germany, it's game over.

The Game Is Up

Ambrose Evans-Pritchard in the Telegraph writes that the German 'yes' vote yesterday, itself a foregone conclusion and irrelevant to solving the immediate Euro crisis, has actually a greater significance. Like the German Constitutional Court a couple of weeks ago, it's a 'yes' to this bailout but a 'no' to any further integration:

The furious debate over the erosion of German fiscal sovereignty and democracy – as well as the escalating costs of the EU rescue machinery – has made it absolutely clear that the Bundestag will not prop up the ruins of monetary union for much longer.

The Germans, the paymasters, have reached their limit of EU integration and this is profoundly significant.

As Bundestag president Norbert Lammert said yesterday, lawmakers had a nasty feeling that they had been "bounced" into backing far-reaching demands. This can never be allowed to happen again. He warned too that Germany's legislature would not give up its fiscal sovereignty to any EU body.

In a sense, the Bundestag vote was much like the ruling by the Constitutional Court earlier this month...what mattered was the Court’s implicit warning that Germany had reached the outer boundaries of EU integration, that German democracy is under threat, and its explicit warning that the Bundestag’s fiscal powers could not be alienated to Brussels.

Germans have begun to sense that the preservation of their own democracy and rule of law is in conflict with demands from Europe.

All of which means that Jean Monnet's dream of a Europe with no nation states and no democracy is all over. When confronted head on with the choice of full integration with the EU or sovereignty and democracy, the people will inevitability choose the latter - nation states, territory, a sense of belonging are essential to human nature.

Monnet himself knew this, which is why he adopted a process known as 'engrenage' or 'gearing' to facilitate political integration. By moving towards 'ever closer union' using what are essentially salami tactics Monnet hoped to achieve his goal without people noticing, until the very last minute. Then he hoped that we would all wake up under a fully-fledged union and say; 'hey I like this new world order'. Deluded yes but his political project came very close to being realised.

And this is why the Euro crisis has been so significant; it has torpedoed completely the engrenage method.

Like everything else in the EU, the Euro was a trojan horse for 'more Europe' - a political project despite Peter Oborne's assertions to the contrary. In a currency union you need to start with politics and end with economics. A currency union needs; one government, one chancellor, one budget, one economic policy and fiscal transfers from richer parts of the union to subsidise other less rich parts. A classic example of a largely successful economic union is the UK for these very reasons.

The EU however put the cart before the horse - it had one currency but 17 different budgets, economic policies and governments - and deliberately so. Knowing they wouldn't get away political union first - because the pesky voters might get in the way, they hoped that the Euro's flaws would facilitate it via the back door. They hoped that the Euro faced regular little 'problems' due to its inherent faults which then could be met with 'more Europe is the solution'. And step by step it would reach its ultimate goal.

Unfortunately (for them) the current problems are so big that the engrenage method is woefully inadequate, instead countries are being asked to make one giant leap to full integration (the only workable solution) missing out all the little steps in-between. And one of the most important countries in the EU has just said nein in response.

It's all over - "the train that is fortunately moving too fast for anyone to stop it" has been stopped. The fallout, the legacy, the problems will all remain with us for a long time yet, but the irresistible force of the EU has reached an immovable object, now it must begin its slow decline.

With deep irony the Germans have saved the rest of Europe from tyranny.

No Surprise

As expected the German Constitutional Court has thrown out the challenges to eurozone financial rescue packages, but Merkel's and the Eurozone's problems are far from over.

German Constitutional Court to Be Taken to the European Court of Human Rights

Great spot by Ironies Too:

The case presented by Professor Markus Kerber over the unconstitutionality of the bailouts and other latters now underway in the EU has been bogged down for what seems an age, as reported from time to time on this blog.

Professor Kerber is now ready to take the complaints the the European Court of Humman Rights, presumably over the head of Germany's highest court Read it here.

As noted on this blog a few times the German Constitutional Court is very reluctant to challenge the supremacy of the EU. So with the bailouts being specifically outlawed under Article 125 of the Lisbon Treaty, it has been dragging its feet on the recent complaints of the legality of the Greek bailouts, to avoid making a decision on what looks a clear-cut case. As a consequence of its delaying tactics (aka ostrich in the sand) it is now likely it will be referred to the European Court of Human Rights because such a 'delay' is "an infringement of the constitutional rights to a hearing and statutory judge" (oh the irony):

The plaintiff group Europolis announces that the Constitutional Court of Germany will have to face a judicial review of its proceeding in the case of the financial aid for Greece and the European Financial Stabilisation Mechanism before the European court for human rights. This action seems unavoidable to Europolis after the Constitutional Court of Germany had not admitted the constitutional complaint of June 29^th 2011. Europolis regards this negligence as an infringement of the constitutional rights to a hearing and statutory judge.

According to Europolis, the oral proceeding on July 5^th 2011 was not in line with the common legal requirements. The Court had clarified that the crucial questions of the economic suitability of the European financial rescue plan would not be under consideration. Also, the alleged voidness [sic] of the loan facility agreements because of infringement of European law as well as the problematic purchase of government bonds by the European Central Bank system had been ignored by the Constitutional Court.

“The refusal to allow the complainants to realise constitutional claims infringes the right of due process and a fair trial guaranteed by the European Convention on Human Rights. That requires a legal clarification by the European Court of Human Rights” declares Kerber.

Once again the institutions of European governments have been shown that they cannot make the final leap to full fiscal and political union but nor can they own up to the obvious - that the project is not working. Instead we are left with lots of fudge - that simply cannot continue.

The German Constitutional Court Restricts Its Own Powers

Back in January this year I wrote about the German age discrimination case of Seda Kücükdeveci, the outcome of which appeared to be a declaration of war by the ECJ on Germany's Constitutional Court's self proclaimed powers over the Lisbon Treaty. At the time I noted:

What's interesting to note is that this is a direct challenge to the German Constitutional Court's self proclaimed supremacy, that it established in a ruling before Germany's ratification of the Lisbon Treaty:

“The peoples of the member-states are the holders of the constituent power. The Basic Law does not permit the special bodies of the legislative, executive and judicial power to dispose of the essential elements of the constitution.”

By ruling that, essentially, directives can have a horizontal effect - they can be relied upon in a suit between citizens - the ECJ has issued a challenge by directly using the anti-discrimination directive in an employer-employee relationship, thus by-passing German industrial law.

It will be interesting to see the Constitutional Court's response.

Kücükdeveci was essentially a Mangold part 2 (this time it's personal) case. Mangold was a notorious case in 2005 which the ECJ ruled that German law was 'inapplicable':

The plaintiff in the so-called Mangold case had a temporary work contract with an auto supplier. The arrangement was based on a government law allowing employers to give only temporary work to people over 52 years of age.

The EU court ruled that the law, proposed as part of a general package to free up the country's labour market, was age discriminatory and should not be enforced. This in turn led the national court to say the plaintiff was within his rights to ask for a permanent contract.

The employer then took the matter to the constitutional court saying that the EU court had overstepped its powers by ruling on short-term contracts as protection against anti-age discrimination was not part of EU primary law but had been handed down in a directive, which member states have some leeway in implementing.

Quite simply there has been a sort of legal arms race between the German court and the ECJ over EU primary law. And according to the judgment reported by today's EUObserver it looks as if the Germans have backed down for the sake of EU unity:

Germany's constitutional court has laid down the ground rules for controlling decisions by the EU top's court, an area that had been left unclear after a controversial 2009 ruling by Germany's highest judges on the Lisbon Treaty, the EU's new rule book.

Thursday's pronouncement backed by seven of the eight judges not only avoids a direct conflict with the EU's Luxembourg court but also appears to strengthen it. Germany's court stated that EU decisions may only be checked if European institutions seriously overstep their powers.

As a headline in the Frankfurter Allgemeine Zeitung says: "Karlruhe (the court) restricts its own powers."

The ECJ is trying to expand the scope of EU law and establishing its primacy via Directives so that they are directly applicable. It now appears they won't meet much resistance (my emphasis):

One judge, Herbert Landau, disputed the decision reached by his colleagues, whom he accused of abandoning the Lisbon Treaty consensus. He said the ECJ decision on age discrimination was clearly overstepping its powers and said his colleagues did not take into account the creeping transfer of powers to the EU.

German President Roman Herzog, who has been critical of the direction of the EU court's rulings in the past, has previously written that the Mangold case would set the tone for future relations between the ECJ and national courts.

It's currently developing its jurisprudence in the area of age discrimination and it's hard to see how the German Constitutional Court will now challenge the Kücükdeveci verdict.

The only question left is what area will be next for the ECJ?

ECJ Ruling Challenges Supremacy of German Constitutional Court

I'm a bit late to this, but I've just spotted this ruling by the EU Court of Justice on Tuesday. It involves the case of a 28-year-old German woman, who claimed age discrimination on the basis that her employer refused to take account of all her years of service to calculate her redundancy notice period.

Seda Kücükdeveci had been working for Swedex GmbH since she was 18 and she was made redundant in 2006. Under German law, her employer needs only to take into account the number of years she had been with the company since aged 25; thus they gave her one rather than four months’ notice.

The ECJ ruled that this was discrimination on grounds of age at the workplace, and was against EU law:

On those grounds, the Court (Grand Chamber) hereby rules:

1. European Union law, more particularly the principle of non-discrimination on grounds of age as given expression by Council Directive 2000/78/EC of 27 November 2000 establishing a general framework for equal treatment in employment and occupation, must be interpreted as precluding national legislation, such as that at issue in the main proceedings, which provides that periods of employment completed by an employee before reaching the age of 25 are not taken into account in calculating the notice period for dismissal.

2. It is for the national court, hearing proceedings between individuals, to ensure that the principle of non-discrimination on grounds of age, as given expression in Directive 2000/78, is complied with, disapplying if need be any contrary provision of national legislation, independently of whether it makes use of its entitlement, in the cases referred to in the second paragraph of Article 267 TFEU, to ask the Court of Justice of the European Union for a preliminary ruling on the interpretation of that principle.

What's interesting to note is that this is a direct challenge to the German Constitutional Court's self proclaimed supremacy, that it established in a ruling before Germany's ratification of the Lisbon Treaty:

“The peoples of the member-states are the holders of the constituent power. The Basic Law does not permit the special bodies of the legislative, executive and judicial power to dispose of the essential elements of the constitution.”

By ruling that, essentially, directives can have a horizontal effect - they can be relied upon in a suit between citizens - the ECJ has issued a challenge by directly using the anti-discrimination directive in an employer-employee relationship, thus by-passing German industrial law.

It will be interesting to see the Constitutional Court's response. It will also be interesting to see Cameron's response (should he win the GE) when he, undoubtedly, faces a similar challenge despite his rhetoric regarding a sovereignty bill.

I don't hold out much hope.