Cookie Notice

WE LOVE THE NATIONS OF EUROPE
However, this blog is a US service and this site uses cookies from Google to deliver its services and analyze traffic. Your IP address and user-agent are shared with Google along with performance and security metrics to ensure quality of service, generate usage statistics, and to detect and address abuse.

Monday 11 May 2020

Earthquake hits the EU - but wait for the aftershock

The brawl between Germany and the EU over the ECB's QE will be one of the most spectacular fallouts since Maastricht. Get the popcorn out, and draw up a seat. 

Germany's Constitutional Court released a judgement on 5th May which essentially had two legs; that the Federal Government and the Bundestag were at fault in failing to challenge the ECB's PSPP (Public Sector Purchase Programme), and that the ECB had exceeded its authority by delivering the programme. Prior to forming a judgement, the court had referrred the question of the ECB's actions to the ECJ, which of course found that the central bank was not at any fault. The Constitutional court then ripped apart the ratio decidendi of the EU's political court in three tightly argued paragraphs and concluded -
In light of the aforementioned considerations, the Federal Constitutional Court is not bound by the CJEU’s decision but must conduct its own review to determine whether the Eurosystem’s decisions on the adoption and implementation of the PSPP remain within the competences conferred upon it under EU primary law. As these decisions lack sufficient proportionality considerations, they amount to an exceeding of the ECB’s competences.
Well, you can imagine the outrage in Brussels. The EU's political court is quite openly constituted to act to further the political aims of the EU - they don't even try to pretend it's not. The German Constitutional Court is concerned with the most fundamental basis upon which Germany was permitted to function as a nation after the period 1933 - 1945, the Grundgesetz, which set in concrete rules that would prevent the German people ever again repeating the actions of those years. Germany's membership of the EU is explicitly on the basis that the EU cannot legislate anything in contravention of the Grundgesetz - it is inviolable

Wolfgang Münchau writes in Marxist daily The Financial Times -
The ECB is, of course, not subject to German law. As an EU institution it answers to the European Court of Justice. But this ruling is binding on the Bundesbank. I doubt that Jens Weidmann, its president, will want to fob off the German judges with a superficial response. The ruling only allows the Germans to take part in the asset purchase programme for another three months unless they find a way to comply. Theoretically, the ECB could proceed without Germany. But I would strongly advise against it because that could precipitate a eurozone break-up.
The EU's political court was also not slow to assert its authority, and released a statement -
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. 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.
In other words, the EU is telling Jens Weidmann of the Bundesbank that he should do as the ECJ says, not as his own Constitutional Court instructs him.

This is going to be massive.

19 comments:

Anonymous said...

Yes, it should be massive, that rather depends on whether or not the
Empress wants to make it so. Are we witnessing the first warning from Germany that they won't be the Euro lender of last resort? Germany takes the EU presidency in July, it could be interesting.

DiscoveredJoys said...

Okay... that's 'Ever Closer Union (unless it doesn't suit Germany'. Just as it always has been but the clerisy were too polite to mention.

Perhaps some Leavers were misled or perhaps some Remainers were misled?

I have no wish for the EU to collapse in rubble but I wouldn't mind if it reverted to a simple Free Trade Area once more.

Mark said...

If Germany didn't want to be lender of last resort, it shouldn't have let countries with proven records of economic incontinence join its empire.

Or having done so, at least retained some sort of moral authority by sticking to it's own rules rather than driving a panzer and horses through them with tiresome and predictable regularity.

Who IS responsible for Euro debt?

Who picks up target 2 balances and Euros held by central banks? Are all Eurozone countries going to say "nothing to do with us, go to the ECB".

It will be very interesting.

DeeDee99 said...

The EU has a long record of breaking "the Rules," or making them up, in order to advance the project - and Germany's never stopped it before.

I doubt if Mutti will want her legacy to include the break-up of the Eurozone and possibly the EU.

So there'll be a lot of noise, bluster and brinkmanship - and then a way will be found to keep the rickety EU Show on the road a bit longer.

Dave_G said...


The problems always boil down to the common denominator - banks. It is by their manipulation of finance and ability to create money from thin air that got EVERY country into the messes they are in.

What could countries do with simply just the interest they currently pay for borrowing 'fabricated' currency? The UK forks over around £50bn EVERY YEAR year in interest yet we are up in arms over a ONE OFF £100bn for a train set....

Speculative trading and gambling with the 'invisible' profits from trading fake cash but leaving the borrower on the hook for those failures is criminal and only banks could get away with it - anyone else would be arrested and jailed for running a ponzi scheme.

It's either clever (but more likely devious) of banks to work in a manner that avoids legal scrutiny and an even bigger surprise that a court is prepared to hold them to account - albeit decades too late.



Span Ows said...

re the money, a good 30% of all debt would disappear if all the 'overlaps' were ironed out i.e. Italy owes Spain xy and Spain owes Italy xyz so just cancel the differnce but of course all the interest etc over decdes is already calculated and probably spent. Ah well.

Re ECB and Germany tiff, like others I suspect 'more Europe' will be the naswer. I am sure Greg and a certain anon can explain.

Anonymous said...

Massive?

Like "the euro will be dead and buried by Christmas 2012" as Farage said, you mean?

Mark said...

Hell's teeth, this again!

The longer the Euro lasts, the more debt is accrued. The more damage is done to the imprisoned economies. The more opportunity for hypocrisy, backstabbing and for countries to fuck each other over.

And, of course, the well of bitterness that will last long after it's gone just gets deeper.

I suppose you want us in this ad well?

Span Ows said...

It's amusing but I searched for that quote from Farage and the top TWO pages are all comments on blogs (mainly John Redwood's Dairy and Raedwald!). I cleared cookies and my browsers delete history, then restarted my machine to try to clear any bias...anon, can you post a link or is it as "hug a hoodie" lie as in Cameron never said it, or a "no such thing as society" intentional totally out of context quote?

Dave_G said...


Ostritch EU fanatics will, when the SHTF, still blame Brexit. It is a fact of life that the fanatics - invariably global warming supporters and left wing with it - are incapable of accepting blame nor recognising or acknowledging facts.

I wouldn't be so aggrieved if it was just 'them' that picked up the inevitable bill for the trouble they caused but, like the cowards and liars they are, it will always be someone else's fault and expense.

As with the principle of 'no taxation without representation' those that support the EU can pay for it. I don't want to.

Dave_G said...


@SO - I understand the 'overlap' but if the interest was forgiven and/or rebated the actual dabt COULD be repaid (in time) - it's the compounding that compounds the problem.....

Much of people's troubles (financial) during the (fabricated) crisis could easily have been avoided if the banks were MADE to suspend all debt, loan and interest payments until the (fabricated) crisis was over.

The lack of discussion over who will benefit after this crisis is deafening.

Elby the Beserk said...

Mark 11:20

Quite so. And it is worth pointing out that the EU has shovelled money from all over Europe to Germany. The Euro is of course the Mark, for starters.

https://www.forbes.com/sites/miltonezrati/2018/01/23/the-german-swindle-built-into-the-euro/

Sobers said...

"re the money, a good 30% of all debt would disappear if all the 'overlaps' were ironed out i.e. Italy owes Spain xy and Spain owes Italy xyz so just cancel the differnce"

This is a fallacy, because the creditors and debtors are different people/entities in the different countries. If German citizens/companies owe Spanish citizens/companies £50bn, and vice versa the amount is £100bn, how do you net that out on an individual basis? Say that all the Spanish debtors get 50% of their debt removed? Where does that leave a Spanish company/individual thats owed money by a German one? Do they lose their money entirely? All a netting out process does is effect a massive transfer of wealth from creditors to debtors within each country.

Anonymous said...

Whoa camel! Germany retains sovereignty within the EU superstate? So what was Brexit about?

Domo said...

Its always been
German law
Eu law
Local law

Domo said...

Dont mistake "italian pension funds" are owed x by spain for Italy is owed x by spain

Mark said...

You've become so desperate to provoke a reaction and so consumed by hate you've started trolling yourself!

Span Ows said...

Sobers, I meant the amounts owed by the governments of each. I know that even then it isn't one big Spanish account owes one big Italian account.

Greg T said...

Radders
I note you've picked up my sarcasm about the "FT" being a dangerous left-wing paper.
Well done.
If some of the idiots here would read it occasionally, maybe we wouldn't be in the shit-hole we are.
Brexit, the English Juche, included.

I assume Herr Weidmann will tell the ECj where to insert it?
As you say the Grundgesetz MATTERS