EU end inches closer. German court says NO to Eurobonds (Video)

Pam Barker | Director of TLB Europe Reloaded Project

Alex Christoforou and Alexander Mercouris refer in the video discussion below to the ESM or European Stability Mechanism, which is a European Union agency that provides financial assistance, in the form of loans, to eurozone countries or as new capital to banks in difficulty. It is a permanent agency, based in Luxembourg, and has replaced the temporary European Financial Stability Facility (EFSF)’. This ESM fund is paid into by all EU countries, but richer member states like Germany pay more. It’s the fund from which bailouts to countries like Greece and Italy have been made, and which Germans naturally don’t like.
Effectively, the German constitutional court has ruled against the ECB purchasing coronabonds to help bail out countries most affected by the coronavirus, and thus the entire rationale for the ESM. Coronabonds would mean debt mutualisation where every EU country, including Germany, is jointly responsible for new debt issued. But the German ruling goes further than that.
Alexander Mercouris gives us a broader context on this, explaining that, quietly behind the scenes, the ECB has already been printing money and buying up Italy’s bonds to help it deal with its debt. The German constitutional court has flatly come out against this type of practice. Further, it ruled that the European Court of Justice, which allows this, is wrong to permit it, that all of these bond-buying schemes run contrary to German law. Which also means that the practice of QE (quantitative easing – printing as much money as you need, of what is effectively Germany’s currency) is also unconstitutional for Germany. German taxpayers will also not going on indefinitely bailing out the ESM.
The EU has also proposed another fund – a recovery fund – to help various EU countries get through the virus scare. But the German constitutional court is against building up these sorts of funds in what they see as purely a form of fiscal transfer.
Mercouris envisages Merkel as simply ignoring the decision of her country’s constitutional court and allowing more bond buying by the ECB to continue as it has been doing, while however not venturing into the territory of formal coronabond issuance. At some point, however, lawsuits may arise against the ECB’s practices, thus satisfying Germany (not Merkel) while putting the entire European project and the euro on which it is based at ultimate risk.

‘Merkel’s running out of road’ to keep the game going – Alex Christoforou.

Interestingly, it is the German constitutional court that has ultimate legal sway in Germany, not the European Court of Justice!  See also this interesting piece by from May 5 aptly titled German court lays down EU law, which makes this point and dissects aspects of the German court’s rulings.

EU end inches closer. German court says NO to Eurobonds (Video)

The Duran Quick Take: Episode 547

The Duran’s Alex Christoforou and Editor-in-Chief Alexander Mercouris discuss how Germany’s Constitutional Court upheld several complaints against the European Central Bank’s purchase of government bonds under a program started in 2015 and meant to boost EU economies and hold inflation to just below 2%. The ruling by Germany’s supreme court was the result of years of debate over the role of the eurozone’s central bank.

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Via DW…

The highest court in the European Union lashed out on Friday after Germany’s top court deemed one of its rulings to be not legally binding.

In a sharp rebuke of the German Constitutional Court (BVerfG), the European Court of Justice (ECJ) asserted that it alone had jurisdiction over the European Central Bank (ECB).

“In order to ensure that EU law is applied uniformly, the Court of Justice (ECJ) alone … has jurisdiction to rule that an act of an EU institution is contrary to EU law,” a statement said.

“Divergences between courts of the member states as to the validity of such acts would indeed be liable to place in jeopardy the unity of the EU legal order and to detract from legal certainty.

“Like other authorities of the member states, national courts are required to ensure that EU law takes full effect. That is the only way of ensuring the equality of member states in the Union they created.”

German ruling

The rebuke came after the German court controversially ruled that the ECJ had simply rubber-stamped ECB policy with confusing argumentation.

The BVerfG upheld several complaints against the ECB’s bond purchasing program, started in 2015, that was meant to boost the economy and stoke inflation toward closer to 2%. It did not cover newer policies on the coronavirus. It said the program was beyond the mandate of the ECB and said the German central bank must quit the scheme within three months unless the ECB can prove its necessity.

The program is credited with having ended the eurozone debt crisis; however, some critics argue it flooded markets with cheap money and encouraged government overspending.

The German ruling stoked fears that it could be used for anti-EU efforts by the nationalist governments of European Union member states such as Hungary and Poland.

There are also fears the decision could help raise objections to a new bond-buying scheme meant to support Italy, Spain and others from economic ruin due to the coronavirus pandemic.

The policy of buying up government bonds is meant to push private investors towards riskier investments.


Original article


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