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Thread: German Court Questions ECB's Bond Buying - "Legality" of OMT in Doubt

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    Default German Court Questions ECB's Bond Buying - "Legality" of OMT in Doubt

    It may still go ahead but Mr Draghi's OMT is to come under the microscope.

    Germany’s top court questioned the European Central Bank’s bond-buying plan and asked the European Union’s highest tribunal to rule on the legality of the program.

    Germany’s Federal Constitutional Court put the fate of the ECB initiative, credited with easing the euro debt crisis, partly in the hands of the European Court of Justice in Luxembourg. Judges at the German court expressed doubts about the legality of the measure in a six to two vote.


    “Subject to the interpretation by the Court of Justice of the European Union, the Federal Constitutional Court considers the OMT Decision incompatible with primary law,” the court said in a statement, in reference to the ECB’s Outright Monetary Transactions program. “Another assessment could, however, be warranted if the OMT Decision could be interpreted in conformity with primary law.”
    http://www.bloomberg.com/news/2014-0...ase-to-eu.html
    Thomas Jefferson : Banking Establishments are More Dangerous to our Liberties than Standing Armies.

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    Default Re: German Court Questions ECB's Bond Buying - "Legality" of OMT in Doubt

    Quote Originally Posted by ang View Post
    It may still go ahead but Mr Draghi's OMT is to come under the microscope.
    The German Court has passed the buck to the European Court of Justice, which is perceived to be pro EU. It doesn't matter how illegal things are, if they are required to operate the machine, they are likely to be declared legal.

    The article is a reminder that German participation in the ESM is still with the Courts.

    The existence of the Union and the Euro has pulled together rafts of different ad hoc and intergovernmental agreements, and the ECB and other institutions have treated their remits as if made of elastic. The ECB in theory deals with monetary and not economic policy. Decision making at State level is being diluted for big as well as small states. The EP has no significant powers. The EU is in some ways a headless and legless giant, charging ahead on the basis of the complex of nerve endings in its spine, all of which converge on the interests of big capital in Europe.
    “ We cannot withdraw our cards from the game. Were we as silent and mute as stones, our very passivity would be an act. ”
    — Jean-Paul Sartre

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    Default Re: German Court Questions ECB's Bond Buying - "Legality" of OMT in Doubt

    Allusion,Collusion,Delusion and Illusion just about sums up the ECB/EU strategy.

    All upheld and backed by National Governments.
    Thomas Jefferson : Banking Establishments are More Dangerous to our Liberties than Standing Armies.

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    Default Re: German Court Questions ECB's Bond Buying - "Legality" of OMT in Doubt

    Megan Greene is following the OMT difficulties closely.

    She says it could be years before it gets up and running (if ever).
    Also that this puts peripheral economies that are in trouble in a riskier situation, Portugal, Spain and Italy are mentioned.
    “ We cannot withdraw our cards from the game. Were we as silent and mute as stones, our very passivity would be an act. ”
    — Jean-Paul Sartre

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    Default Re: German Court Questions ECB's Bond Buying - "Legality" of OMT in Doubt

    German population again realizing they cannot have their cake (cheap currency to fuel their exports globally and very large area sharing "their" currency) and eat it (set monetary policy)

    ECB head Draghi doesn't understand why he is getting so much resistance from the country that has profited from the euro more than any other. Yet Germans blame Draghi for miniscule yields on savings accounts and life/retirement insurance policies. Frustration is growing.

    Most dangerous for Draghi, however, is the displeasure from the German Finance Ministry. A few weeks ago, Finance Minister Wolfgang Schäuble warned the ECB head that his ultra-loose monetary policies could "ultimately end in disaster." The fact that Schäuble said anything at all is rather surprising, as were the words he chose. Out of respect for the ECB's independence, finance ministers tend not to comment on decisions made by the central bank.


    But Schäuble believes Draghi's course is calamitous. He is concerned that the unchecked creation of money could lead to new bubbles on the financial markets. Furthermore, negative interest rates have a negative impact on the profit margins of commercial banks -- and part of the ECB's mission is ensuring the stability of such banks. Schäuble believes that Draghi's policies create misguided incentives for the governments of euro-zone member states.

    To be sure, ECB independence is also of vital importance to Schäuble as well. But that is no longer the case when the bank's policies exceed its legal mandate. It is a boundary that Schäuble believes Draghi and his people have crossed, which explains why the minister does not have a bad conscience about abandoning traditional reserve. "We have to initiate this dialogue about monetary policy," says a Finance Ministry official.

    Were the ECB, as Draghi has indicated it might, to open the monetary policy gates even wider -- with, for example, helicopter money -- the German finance minister would view it as a breaking point. Such a policy would see the ECB bypass the banking sector and distribute money directly to companies, consumers or states, all of which would stand in violation of the central bank's own statutes. Should it come to that, sources in the German Finance Ministry say, Berlin would have to consider taking the ECB to court to clarify the limits of its mandate. In other words: the German government and Draghi's ECB would be adversaries in a public court case.

    Such a legal battle between the government and a central bank would be a first in German history. It could lead to a constitutional crisis of unprecedented severity or to currency turbulence -- which is why it is extremely improbable that the two sides would allow the conflict to escalate to such a degree.

    http://m.spiegel.de/international/eu...im-ecb-spiegel
    Politics is the gentle art of getting votes from the poor and campaign funds from the rich, by promising to protect each from the other. ~Oscar Ameringer

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