Top judge warns of Germany’s possible exit from the euro and the division of the eurozone
Former Federal Constitutional Court judge, Udo di Fabio, warns Germany to prepare for an exit from the eurozone.
The judge has released an opinion essay in light of the pending Federal Constitutional Court hearings, due to be heard on Tuesday, which argue against rescuing the euro.
Outlining a plan for the “rescue of the euro and European integration,” the opinion essay is entitled: “Guidelines for a stable economic and monetary union.” Fabio warns the court over the consequences of Germany leaving the euro.
However Mario Draghi, president of the ECB (the European Central Bank which is responsible for managing the euro) told a press conference on Friday that ECB policy will remain as “accommodating” to eurozone members as it can, making no reference to a German exit.
In regard to alternative eurozone restructuring, Draghi said the “governing council welcomes the progress made and encourages governments to continue with determined efforts,” calling for EU members to be patient, pointing to the current forecasts of eurozone growth.
Draghi suggested that any euro structural reforms should “target competitiveness and adjustment capacities in labour and product markets, thereby helping to generate employment opportunities”.
The 2012 formation of the European Stability Mechanism (ESM) – which has a “lending capacity of 50 million euros” and intergovernmental power to implement “debt instruments” to aid faulting eurozone members – is subsequently under strain: a German exit would end their involvement with the ESM, which currently draws 27 per cent of its contributions from Germany.
Germany’s central bank, Bundesbank, announced a cut in its forecast for growth this year, telling Reuters on Friday that the cut is “due mainly to downward revisions with regard to the external environment”. Germany is consequently seeking export trade from outside the eurozone.
Financial turmoil in the eurozone has also brought about Alternative for Germany, a political party founded by economics Professor Bernd Lucke which campaigns for Germany to leave the euro.
George Soro, author of The Alchemy of Finance and The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What it Means said in April: “Eurobonds [debt instruments] issued by a Germany-less eurozone would still compare favorably with those of the US, UK, and Japanese bonds.”
Soros also predicted: “If a referendum in Germany were held today, the supporters of a eurozone exit would win hands down.”
Lucy EJ Woods