German MP makes new bid to stop eurozone rescue fund
Last night one of Angela Merkel's MPs launched another legal challenge to Europe's new bailout fund (the ESM), on the back of the European Central bank's bond-buying plan announced last week.
Peter Gauweiler, a CDU backbencher, argues that the Outright Monetary Transactions programme (in which the ECB would buy up government debt under certain conditions) violates German law.
He has asked Germany's constitutional court to consider this issue alongside the existing challenge to the ESM.
Gauweiler's office argued that the unlimited bond-buying programme announced by Mario Draghi last Thursday had "created a completely new situation"r regarding the ESM, making the impact on Germany's taxpayers "completely incalculable".
In a statement, Gauweiler said:
The ESM -- insofar as it is constitutionally viable at all -- should only come into force when the ECB has taken back its self-awarded power as a hyper rescue-shield.
It's not immediately clear if the Constitutional Court has accepted Gauweiler's complaint, or if it will affect the decision due on Wednesday.
German vice-chancellor Philipp Rösler urged calm last night, saying he couldn't see that the two issues were particularly linked.
6 comments:
Recognising the gravity of the situation, it seems unlikely the Supreme Court will go against what the politicians have agreed and totally derail the rescue/bailout process because then they will be blamed for the likely financial collapse of Southern countries which could follow. More likely they will make some wordy caveats which keep their options open whilst letting things go ahead as planned. Of course, delaying the whole issue indefinitely would get them off the hook because then they can simply be overtaken by events which is much more comfortable.
The misselling of Payment Protection Insurance and LIBOR fudging is peanuts compared to the misselling of QE, bailouts, bond-buying, and similar government blessed-Treasury/Central Banking (Fed/Bank of England/ECB) operations to the public.
This ruling is not about wether the German government is allowed to waste the taxpayers money by giving it to Greece, it is not the job of the court to make policies. The job of the court is to preserve democracy and the ESM is giving away the most important right of parliaments, the budget right, to unelected EU bureaucrats. It is a direct attack on democracy and the court is ruling wether that is legal or not.
A German Court Ruling against Merkel could trigger an superuber-domino effect, with similar legal challenges in the UK against Brown's bailouts and Osborne-King's QE and in the US against the Goldman Sachs supervised Bush-Obama-Betranke-Fed bailouts/QE. All the government interventions to prop up the banks, making the taxpayer pay for the bad lending of the banks, would get legally called into question.
An interesting set of issues about the power of the state over the economic freedom and financial security of the citizen. Can the state effectively drag you into transactions to which you weren't a party? Can you be made to pay for corporate losses for which you were not responsible? Are there no limits on the state powers for this purpose? Is there any legal obligation of the state towards the citizen in exercising its powers of taxation? Is there any legal protection for citizens against actions of the central bank eroding their savings, pensions, purchasing power? Do you effectively own anything or it all actually belongs to the state and you can only enjoy it at the state's discretion?
In the case of the EU, there's the additional layer of complexity of the powers of the EU superstate combined with or versus the national state over the citizen.
No Super Domino Effect is even remotely possible. The matter under scrutiny is primarily related to the German Federal Republic and whether its government or ministers have the authority to hand over fiscal powers to the ECB under the German Constitution (the actual handing over of money is a downstream effect of this action). There may be issues related to any Eurozone agreements or treaties that may have granted this power via the Lisbon Treaty.
It has zero effect on the USA, which has a completely different governing legislature and constitution.
As for the UK, it is not in the Eurozone, but is a member of the EU via the Lisbon Treaty. The main issue here (for UK), is that if the German court states the current activity is not correct without a new treaty, then such a new treaty would open the door to a possible UK exit, as Parliament passed a law requiring a referendum on ANY new EU Treaty
I hope they disallow the bailout. The idea that Europe's only functioning economy should give unlimited funds to Europe's failing countries is just Bonkers. In the long term it will help nobody as the southern states will stay bankrupt unless they learn to spend not more than they earn.
Unlimited bailouts will just lead to a bankrupt Germany which is no good to anybody. We need a successful Germany to buy our Goods and services.
"The inherent vice of capitalism is the unequal sharing of blessings. The inherent virtue of Socialism is the equal sharing of miseries" Winston Churchill
Post a Comment