Markus C. Kerber, Professor at TU Berlin, talks to GoldMoney’s Alasdair Macleod about his lawsuit against the European Union’s Fiscal Compact and the permanent bailout fund known as the “European Stability Mechanism”. He also discusses his advocacy of currency competition in Europe.
The modern German constitution was set up in a way that emphasises the importance of parliamentary democracy. Budgetary sovereignty takes a core position in this democracy and cannot simply be transferred or altered. The constitutional court of Germany is the guardian that has to approve any changes. Kerber fears that the financial burdens which come with giving more powers to Brussels will undermine the democratic principles of the German constitution.
Both men agree that the eurozone bailouts have violated the Stability and Growth Pact, which included a “no bailout” clause. This is especially important given the fact that many EU nations only agreed to join the euro club because of this promise, which states that every nation is fully liable for its own debts. With the introduction of the ESM the no bailout clause would be permanently suspended — the legality of which is to be assessed by German courts as well.
Kerber’s lawsuit quantifies the potential losses for Germany that would occur if Italy, Spain and France requested 1.7 trillion euros of support from the fund. This would lead to rising interest rates and certainly be unsustainable.
To prevent a hard landing and further capital flight from the eurozone, Kerber’s vision is to introduce parallel currencies to give citizens and corporations options. He would enact a hard currency called the “Guldenmark” to rival the soft currency euro. Details on his plan can be found in his book More Monetary Competition which is available in English and German.
This podcast was recorded on 16 August 2012.