Mario Draghi wants to save the euro at all costs. But the ECB chief may in the event of a crisis pumping billions into the markets at all? The criticism of the course of the central bank is large. Before the European Court, the ECB must now defend.
Once again, the ECB is on trial. The Court heard this Tuesday on measures of central bank against the crisis. Specifically, it is a program to buy government bonds, which was never used.
What turns the Luxembourg process?
will negotiate the announcement by the European Central Bank (ECB) from the summer of 2012, if need be without limit to buy bonds issued by euro-crisis states. The Federal Constitutional Court came in February 2014 at the conclusion that the ECB had exceeded its powers with this so-called OMT program (“Outright Monetary Transactions”): The ECB should according to the European treaties do not operate independent economic policy. In addition, the Constitutional Court was of the opinion of the OMT decision is contrary to the prohibition of co-financing from national budgets. The final decision about leaving the Luxembourg Karlsruhe judges.
What exactly is the OMT program?
the beginning of September 2012, the Governing Council decided against the resistance of Bundesbank President Jens Weidmann, grab Euro-crisis countries, if necessary, with the unlimited purchase of government bonds under the arms. The conditions: The respective States shall previously an auxiliary application to the euro rescue fund and be subject to political reform requirements. Acquire the ECB wanted the Bonds in the secondary market, ie about banks, not directly from the States. Spain, Italy, Portugal had benefited from falling interest rates.
What was the goal of the ECB with this measure?
In the summer of 2012, the euro zone faced the ordeal. ECB President Mario Draghi felt compelled to a historic promise: “The ECB is willing to do everything within its mandate, what is needed to save the euro.” Not long after, the OMT program. That alone its announcement, the markets calmed, even critics admit. Draghi’s promise and the OMT program apply as a turning point in the debt crisis: The Fed chairman grub speculators from the water, put on the disintegration of the currency area. The concerns of national bankruptcy in Spain or Italy vanished. Investor confidence in the euro area improved – although the ECB under the OMT did not buy a single bond.
Why are government bond purchases by the ECB so controversial?
Critics say the ECB so was financing ultimately sovereign debt with the money printing press. That makes the central bank depends on the respective States and jeopardize their independence from governments. It also crippling the willingness to reform, if relied States that it is necessary, align the ECB.
How high is the risk of loss?
For all special ECB measures to fight the crisis period, the concern holds that any losses must ultimately bear the tax payer. Because losses could pass on the ECB, national central banks and Germany is on the federal bench with around 26 percent is the largest ECB shareholders. The first purchase program for government bonds (“Securities Markets Programme” / SMP), however, which had launched the Federal Reserve in May 2010, the ECB did in 2012 and 2013, a total of over two billion euro interest income.
When falls in Luxembourg a decision?
At the hearing in Luxembourg once all sides – by the plaintiffs on the ECB to political actors such as federal government, the EU Parliament and EU Commission – belongs. The verdict is expected to fall in about a year.
What threatens the ECB?
Most experts believe that the judges are waving the program. “We expect that the Court will declare the admissibility of the OMT purchases in the summer of 2015,” writes economist Andreas Rees UniCredit. This is consistent with the trend: “In the past, the ECJ had the tendency to extend the influence of the EU decision-makers.” Come the Judge concluded that the buy-back program in violation of European law, the ECB would in future hands tied. However, the ECJ could also make only certain requirements for bond purchases, about the scope or duration. As long as the process is running in Luxembourg, the central bank has further possibilities. According to the court, the procedure shall not have suspensory effect that there was no request for suspension of action before
Video:. How come the outbreak of a currency war