The Karlsruhe-based Federal Constitutional Court will announce its verdict on September 7 at 4 a.m. EDT, it said in a statement on Tuesday.
The court is considering three lawsuits brought by six eurosceptic plaintiffs -- five academics and a lawmaker from the Bavarian sister party to Chancellor Angela Merkel's Christian Democrats -- against German-backed international bailout schemes for Greece, Ireland and Portugal.
The plaintiffs argue that the bailouts, which total 273 billion euros ($393 billion), violate property rights and other protections in the German and European constitutions, and break the "no-bailout" clause in the European Union's treaty, which says neither the EU nor member states should take on other governments' liabilities.
Legal experts believe the court is extremely unlikely to block Germany's participation in the multi-year bailouts, or in an additional 109 billion euro package of official aid for Greece that euro zone leaders announced last month.
However, many legal experts and some government sources say they expect the court to set conditions for German participation in future bailouts, perhaps giving the German parliament a bigger say in approving it. That makes the court's verdict key for the whole euro zone.
For example, the eight judges could require German contributions to the European Stability Mechanism, the planned regional bailout fund which will start operating in 2013, to be subject to a vote by Germany's parliament. Currently, this is not formally mandated.
Any changes, even parliamentary approval will leave the door open at a later date for saying enough is enough.
Biggest Ever Italian Bond Rollover in September
The Telegraph reports Italy needs to rollover €62-billion of bonds in September. The Globe and Mail claims €46-billion.
Finance minister Wolfgang Schäuble could hardly have chosen a more toxic term than "Bevollmächtigung" or general enabling power when he requested blanket authority from the Bundestag for EU rescues, as if Weimar were so soon forgotten. He was roundly rebuffed.
You can feel the storm brewing in Germany. Within days of each other, President Christian Wulff accused the European Central Bank of going "far beyond" its mandate and subverting Article 123 of the Lisbon Treaty by shoring up insolvent states, and Bundesbank chief Jens Weidmann said bail-out policies had "completely gutted" the EU law.
Both believe the EU Project has taken a dangerous turn. Fiscal powers are slipping away to a supra-national body beyond sovereign control. "This strikes at the very core of our democracies. Decisions have to be made in parliament in a liberal democracy. That is where legitimacy lies," said Mr Wulff.
We will find out to what extent Germany's constitutional court shares these fears when it rules this Wednesday on the legality of the EU rescue machinery, and delivers its verdict of life or death for monetary union.
The assumption this time is that the eight judges will insist on beefed up powers for the Bundestag, but will not disturb the existing nexus of bail-outs and bond purchases. That is the most likely outcome.
Whether they go any further is the existential question for EMU. If they rule that the permanent bail-out fund (ESM) after 2013 breaches treaty law, they will queer the pitch greatly since the viability of the current fund (EFSF) depends on a hand-over.
If they rule in any significant way that the EFSF itself breaches Lisbon's `no bail-out' clause, or even that Germany cannot participate until the Treaty is changed, market confidence in monetary union will collapse instantly.
Whatever the court does, the simmering revolt in the Bundestag over recent weeks lays bare the salient strategic fact that Germany is not about to embrace fiscal union or quadruple the EFSF to €2 trillion, as deemed necessary by City analysts and EU officials to stabilize Italy and Spain. Nor will it pay for a third Greek rescue.
The EU-IMF Troika left Athens abruptly on Friday, blaming Greece for failure to comply. The equal failure is the scorched-earth austerity policies imposed by the EU itself. Fiscal deflation cannot work in a rigid economy with a large trade deficit and a high debt stock. It ensures a Fisherite debt deflation spiral.
The IMF must know from its errors in Argentina a decade ago that Greece needs a 40pc devaluation and 50pc debt forgiveness to claw back to viability. Yet the EU has blocked both, and the Fund has until now acquiesced.
Needless to say, battered banks, insurance companies, and pension fund will not wait for further rounds of punishment. They know that Italy must redeem €14.6bn of debt this week and €62bn by the end of September, the highest ever in a single month. It must roll over €170bn by December.
The ECB can in theory hold the line by soaking up the entire public debt of Italy, the world's third largest at €1.84 trillion. The question is whether it can plausibly act on such a theory when the president of EMU's dominant power deems this to be illegal.
THE STRUGGLE to keep the ailing Greek economy afloat took a further turn for the worse as the EU-IMF "troika" abruptly suspended talks in Athens on the release of the next round of rescue aid to the country.
A team of troika inspectors unexpectedly left Greece yesterday after the emergence of divisions with the government over the execution of reforms agreed in its first international bailout.
With the release of each round of bailout loans contingent on the delivery of agreed reforms, the latest breakdown raises fresh questions about the government's capacity to implement the rescue plan.
The dispute comes as Greece tries to persuade private creditors to bear investment losses as a condition of its second bailout. The terms of the second rescue were finalised in July after months of dispute which intensified the sovereign debt crisis.
With Italy and Spain under pressure, the latest turmoil in Athens unsettled bond markets yet again. Greek two-year bond yields soared to a new record of more than 46 per cent and Italian and Spanish borrowing costs also rose.
The troika – comprising the EU Commission, the ECB and the IMF – sent an inspection team to Athens a fortnight ago for the fifth quarterly review of the first Greek rescue. Top officials from the three institutions joined talks with Greek ministers on Monday but the deadlock persists.
"At a certain point you reach the conclusion that there is no point in having new meetings every day – and you leave the Greeks a chance to do their homework," said a source close the troika.
At issue is the Greek government's failure to deliver promised reforms to public sector pay and its tax collection system. The troika is also unhappy with the government's failure to liberalise a number of professions.
Although the IMF had hoped to wrap up the talks next Monday, the troika said yesterday that its inspectors now expected to return to Greece by the middle of the month. It wants Athens to complete technical work by then and to continue talks on policies needed to complete the review.
Can Italy rollover debt without help from the ECB? I highly doubt it, but we are about to find out.
There is lots of Eurozone action in September, that's for sure.
Exit polls for the vote in Mecklenburg-Vorpommern gave Mrs Merkel's Christian Democrats just 24 per cent of the vote, down from the 28 per cent they garnered in the last vote in 2006. Adding to her woe was the performance of the Free Democrats, her coalition allies, who could be wiped out of the regional assembly, with just 3.6 per cent of the vote.
If the results stand, the Christian Democrats face the unpleasant possibility of being ousted from their current state coalition with the Social Democrats. Exit polls gave the left-wing party 37.7 per cent, and it could decide to strike an alliance with the Left Party or the Greens instead of maintaining the coalition.
To lose on her home turf will come as an acute embarrassment to Mrs Merkel.
She made nine visits to the state of 1.4 million people in the lead up to the election, and the defeat will raise question marks over her credibility and leadership.
Before the Mecklenburg-Vorpommern vote, the Christian Democrats had already suffered a series of humiliating pummellings in five regional elections this year. In March the party lost control of the prosperous state of Baden-Wurttemberg for the first time in 60 years after the Social Democrats and a resurgent Green Party pushed them into a lowly third place.
Angela Merkel, the German chancellor, suffered a blow on Sunday as the parties underpinning her national government were on course for big losses in a regional vote in the Baltic Sea state of Mecklenburg-Western Pomerania.
Exit polls published by ARD, the broadcaster, shortly after voting closed suggested that Ms Merkel's conservative Christian Democrats faced their worst ever result in the state, with the Free Democrats likely to be kicked out of parliament.
Social Democrats and Greens, the main opposition parties and potential partners in government at national level, gained strongly, although a so-called red-green coalition did not look likely in Mecklenburg.
Manuela Schwesig, a leading Social Democrat and the state's social affairs minister, said the vote gave Erwin Sellering, the state premier, "a clear mandate" to continue governing – though she did not say with which partner.
Voters have clearly had enough of Merkel's Eurozone bailout policies. Whether she has the votes to ram through expansion of the EFSF remains to be seen.
Last week the state of Nevada amended its previous complaints against Bank of America.
The Amended Complaint accuses Countrywide Financial of a "pattern of pattern and practice of deceptive conduct ... misconduct cut across virtually every aspect of Defendants' operations - from originating to servicing and, all too often to foreclosing on the loans and homes of Nevada consumers".
The state of Nevada dramatically expanded its lawsuit against Bank of America today, turning the narrow case it filed late last year into a broadside that targets virtually all aspects of the bank's mortgage operations. Bank of America has previously denied wrongdoing.
The sweeping new suitcould have repercussions far beyond Nevada's borders. It further jeopardizes a possible nationwide settlement with the five largest U.S. banks over their foreclosure practices, especially given concerns voiced by other attorneys general, New York's foremost among them.
Nevada's attorney general charges that Bank of America and the now-defunct mortgage giant Countrywide acquired by the bank in 2008, deceived borrowers and investors at almost every stage of the process.
According to the suit, borrowers were duped into unaffordable loans and then victimized again through a misleading mortgage modification program that homeowners tried to use to avoid foreclosure. Finally, the suit alleges, the bank filed fraudulent documents to move forward with the foreclosures.
"Taken together and separately, [Bank of America's] deceptive practices have resulted in an explosion of delinquencies and unauthorized and unnecessary foreclosures in the state of Nevada," the suit alleges.
The state's suit had previously been confined to the modification issue. At that time, Bank of America also said homeowners would be best served not through litigation but through reaching a multistate settlement that would "broaden programs for homeowners who need assistance."
By expanding the suit, Nevada's Catherine Cortez Masto joins New York Attorney General Eric Schneiderman in stepping up investigations of the bank. In addition to initiating a broad investigation of banks' securitization practices, he recently filed a suit charging that Bank of America had fraudulently foreclosed on homeowners.
Last week, fissures in the coalition became public when Iowa Attorney General Tom Miller, who leads the 50-state coalition, removed New York's Schneiderman from the group's executive committee because, he said, Schneiderman had "actively worked to undermine" its efforts by opposing any quick settlement. As part of any settlement (reportedly in the range of $20 billion to $25 billion), the banks have been seeking a wide-ranging release from future legal claims, not just those related to foreclosure practices. Schneiderman has publicly rejected that idea and pushed ahead with his investigation.
Masto's suit signals that Nevada may also reject any settlement in the near future on the foreclosure issues. Two other attorneys general, notably those from Massachusetts andDelaware, have also voiced concerns recently about any broad waiver of claims.
Bank of America Broke 2008 Mortgage Settlement Agreement
The attorney general of Nevada is accusing Bank of America of repeatedly violating a broad loan modification agreement it struck with state officials in October 2008 and is seeking to rip up the deal so that the state can proceed with a suit against the bank over allegations of deceptive lending, marketing and loan servicing practices.
In a complaint filed Tuesday in United States District Court in Reno, Catherine Cortez Masto, the Nevada attorney general, asked a judge for permission to end Nevada's participation in the settlement agreement. This would allow her to sue the bank over what the complaint says were dubious practices uncovered by her office in an investigation that began in 2009.
In her filing, Ms. Masto contends that Bank of America raised interest rates on troubled borrowers when modifying their loans even though the bank had promised in the settlement to lower them. The bank also failed to provide loan modifications to qualified homeowners as required under the deal, improperly proceeded with foreclosures even as borrowers' modification requests were pending and failed to meet the settlement's 60-day requirement on granting new loan terms, instead allowing months and in some cases more than a year to go by with no resolution, the filing says.
The complaint says such practices violated an agreement Bank of America reached in the fall of 2008 with several states and later, in 2009, with Nevada, to settle lawsuits that accused its Countrywide unit of predatory lending. As the credit crisis grew, the settlement was heralded as a victory by state offices eager to help keep troubled borrowers in their homes and reduce their costs. Bank of America set aside $8.4 billion in the deal and agreed to help 400,000 troubled borrowers with loan modifications and other financial relief, such as lowering interest rates on mortgages.
This Nevada lawsuit is in addition to the FHFA $196 Billion lawsuit against 17 banks accused of "misleading Fannie Mae and Freddie Mac about the soundness of the mortgages underlying the securities".
Bank of America insists it does not need to raise capital but it raised $5 billion from Warren Buffett on very onerous terms and it has been busy shedding billions of assets.
"At this point, there's a huge shortfall between consumer spending, businesses are not going to hire, on the one hand, and also on the economy's potential at full employment or near full employment on the other hand. Government is the spender of last resort. The only way to restart not only jobs, Simon, but also economic growth, which is terribly important for every purpose including deficit reduction. the only way we're going to get the deficits and long-term debt under control is if we get back growth. The only way to get back growth is for government to be this spender of last resort," Former Secretary of Labor Robert Reich told CNBC.
Such idiocy did not work for Japan and it will not work here. Of course the nutcases will simply respond that "Japan did not spend enough".
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