Wednesday, September 07, 2011

German Judiciary Renders Euro Reprieve

Reports of the euro's death are greatly exaggerated, at least for another month.  Germany's constitutional court gave its government a retroactive green light to bail out insolvent European governments.  It meekly called for legislative consultations in future bailouts, but in the increasingly elite-driven Western world that admonishment can safely be regarded as moot. 

Western political leaders can rest assured that threats of "tanks in the streets" (whether from officials like Hank Paulson or this new research report from UBS) will work wonders in forcing bailouts into action.  How the West's leaders gathered around saving the euro isn't clear.  Germany's Merkel was wavering in her support for more eurozone bailouts as recently as August.  Perhaps Rothschild's recent backing of SocGen was the signal that the old European noble houses were not about to let this grand experiment in Continental unity go down the drain.  At any rate, the Swiss bank's devaluation of its franc yesterday confirmed the unanimity of elite opinion on the matter of saving the euro. 

This is not by any means a signal to go long the euro.  Bailouts have a funny way of masking troubles that later reappear despite all good intentions at hiding them.  Insolvency can't hide forever.