If the financial collapse of 2008 taught us anything, it was about the interconnectivity of every market in the world. As Germany’s constitutional court convenes this Wednesday, not only will it determine the fate of the euro, but also the short-term future of the world economy.
Massive national debts have put a chokehold on eurozone economies. Without Germany’s intervention, the euro has the potential to fail completely,xthrowing the entire world economy into turmoil.
If the judges find that the European Stability Mechanism (ESM) complies with the German constitution, it will be the final step in establishing a €700 billion bailout fund to support the other crumbling eurozone economies.
Germany’s parliament and senate have both approved the ESM, and President Joachim Gauck was about to sign it into law when 37,000 Germans petitioned the court with the claim that the ESM and the fiscal pact (which allows the EU to fine countries that spend too much) violates the German constitution.
Should the German people be forced to assume the debts of struggling European economies against their wills — even if doing so may save the European and world economy?
If the German court rules that the new measures are unconstitutional, the German people may escape relatively unscathed while the eurozone is destroyed. Germany’s protection from this potential financial disaster is derived in part from its productive economy, but mostly from its minimal debt obligations — debt being the downfall of the other eurozone countries.
America would be well-served to follow Germany’s example and minimize our debt. That way, when the next financial calamity strikes — such as the euro’s potential dissolution — America may be better able to cope with a global economic disaster.