- A judgment of the German Constitutional Court can set upside down one of the pillars of the European Union’s economic policy: The sovereign debt purchase programme launched in 2015 by the European Central Bank (ECB) does not correspond to the country’s law.
The policy of buying bonds from the countries of the Union has been in force since the time when Mario Draghi was president of the ECB and was one of the keys to the economic recovery of the European Union following the economic crisis that broke out in 2007-2008, thanks to this mechanism billions of euros were introduced into the debt market, giving liquidity to states and companies.
But the German Constitutional Court says that the Bundesbank should stop buying the sovereign debt of other countries if the ECB does not show that such purchases are essential. According to the judgment, the ECB has exceeded its powers with this programme, which has been supervised by Brussels.
Germany does not want to pay
After doing something similar in the United States, the bid to inject large sums of money into the debt market came seven years behind. And it did not come without discussion, especially because of the anti-German attitude.
An initiative that faced two arguments: on the one hand, the German elites did not consider it fair that the “irresponsible” countries of southern Europe lived at the expense of the ECB’s generosity; on the other hand, all the German authorities react very negatively to any possibility of increased inflation, which is witness to the success of the ordoliberal economic doctrine in Germany.
Will not affect aid for COVID-19
The ECB’s programme, promoted by Draghi, ended in 2018, but the Italian relaunched before the office was emptied, with EUR 20 billion a month, following the inauguration of Christine Lagarde. It is true that this figure has fallen short of the European Union’s mechanisms for dealing with COVID-19 – EUR 750,000 million. It is equally true, however, that Germany has already made a very serious warning to the European Union with this decision by its judges.
In fact, it is withdrawing from the European Central Bank a tool for dealing with the following crises: changing the value of the euro could from now on be the organisation’s main instrument for dealing with setbacks. In addition, one of the opportunities that has been in the hands of the COVID-19 crisis, the use of Eurobonds, is going to be even more complicated than already foreseen. The road to the pooling of the debt of the European states is facing a great barrier.