The fate of Europe’s common currency, the Euro, will have a far greater influence on Australians than how long this minority Labor Government staggers on for.

The signs of another financial crisis are certainly looking ominous. Remember the assurances given by the EU and the IMF that they had resolved the problems of Greece being unable to pay its international debts? Take a look at what has happened since.

An immediate and sharp decline as markets took the politicians and financial bureaucrats at their word and then this week a complete lack of faith emerges. A 44% interest rate on two year bonds!

So far the European Central Bank has been able to stop the rate rise from spreading to other southern European countries by purchasing vast amounts of Spanish and Italian bonds but there have to be doubts about whether the ECB’s vaults contain enough wherewithal to keep going for long. Already Finland has demanded that Greece provide it with collateral to put in its share of the last bailout funds and the Germans are getting restless which is far more serious.

The German President, Christian Wulff, yesterday accused the European Central Bank of violating its treaty mandate with the mass purchase of southern European bonds. He warned that Germany is reaching bailout exhaustion and cannot allow its own democracy to be undermined by EU mayhem.

I regard the huge buy-up of bonds of individual states by the ECB as legally and politically questionable. Article 123 of the Treaty on the EU’s workings prohibits the ECB from directly purchasing debt instruments, in order to safeguard the central bank’s independence.

This prohibition only makes sense if those responsible do not get around it by making substantial purchases on the secondary market.

These comments echoed sentiments expressed earlier in the week by the German Bundesbank which also warned that the EU’s broader bail-out machinery violates EU treaties and lacks “democratic legitimacy”.

Looming over the very necessary German contributions to any financial rescue of weaker members of the Euro currency group is a court case before the German constitutional court rules on the legality of the various bailout policies. The London Daily Telegraphreports that a verdict is expected on September 7.