Draghi Almighty: Why ECB Bond-Buying Plans Undermine Democracy

[sysop]

The ECB's plan to restart its bond-buying program is possibly the most important decision of the euro crisis. But the bank is not subject to control by national parliaments. Europe's leaders seem to consider saving the euro to be more important than preserving democracy.

http://www.spiegel.de/international/...854851,00.html

[kogiks]

Originally Posted by sysop

The ECB's plan to restart its bond-buying program is possibly the most important decision of the euro crisis. But the bank is not subject to control by national parliaments. Europe's leaders seem to consider saving the euro to be more important than preserving democracy.

http://www.spiegel.de/international/...854851,00.html

Indeed the ECB mandate is maintaining monetary stability period. But the various EU institutions are now incapable of doing anything more to deal with the worsening EU financial crisis. Bond buying by the ECB is indeed risky if the bonds go bust. But it's the only remaining course of action available unless a complete meltdown of the monetary union is acceptable. In a situation like this being legalistic is the least helpful. Procedural imperfections may nonetheless be quickly adjusted if necessary.

[alfredmifsud]

Draghi is doing a fantastic job in keeping the Euro together and allowing space for polticians to take European integration to the next political level.

He has made a clear case that he is acting within the ECB mandate and his record on inflation control remains as good as that of his predecessor.

He has the support of all the Executive Committe bar one, consensus minus one, and that shows he is not riding roughsod over anybody's head but he is carrying the corpse of the ECB with him and has earned poltical support both from the Commission and from the main EU governments.

He is democratic as his mandate and that of his colleagues on the ECB executive committee has been given by duly elected representatives of the people and in modern democracies Draghi is representing the fourth branch, after the executive, the legislative, and the juridical now we have the monetary and economic column of democracy.

Without the initiatives spearheaded by Draghi in the ECB we would have no Euro, and no EU, we would wirte-off sixty years of European integration and Germany would become feared rather than loved.

Does Weidmann need to re- read history bboks?

[blankfiend]

Article 123 of the TFEU, and Article 21.1 of the Statute for the ESCB and ECB state:

"Overdraft facilities or any other type of credit facility with the European Central Bank or with the central banks of the Member States (hereinafter referred to as ‘national central banks’) in favor of Union institutions, bodies, offices or agencies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States shall be prohibited, as shall the purchase directly from them by the European Central Bank or national central banks of debt instruments."

While Mr. Draghi claims compliance with these Articles by affirming that the ECB is not going to buy in the primary markets, he ignores the prohibition against the establishment of a credit facility in favor of central governments.

It would be exceeding difficult to deny that the OMT is a credit facility in favor of central governments, which is obviously explicitly prohibited. Article 122 of the TFEU, which has been used to justify the EFSF and ESM, does not apply as it only pertains to actions of the Commission and the Council - NOT the ECB.

The problem now is to find an entity with standing before the European Court of Justice to enjoin the ECB from performing OMT pending review of its legality. One potential candidate would be the Bundestag, which would have to force Merkel's hand by passing a resolution demanding that the government take action. However, an even better candidate to bring this suit would be the Bundesbank itself, as it could rightly claim that participating in OMT would compel it to act illegally by establishing a credit facility in favor of a central government.

I develop these thoughts in more detail at http://blankfiendsew.blogspot.com/20...se-at-law.html

[BTraven]

As long as an inflation rate people are not capable of dealing with without reducing their living standard the ECB can buy bonds. They could be stored there for hundreds of years. It's even necessary to write them down. Prolong them.

[blankfiend]

It is not withing the mandate of any unelected central bank to cunningly ensnare people in debt union without their consent. The "safety net" thrown by the ECB is more like a fishing net which promises to further financially entangle nations without the consent of their electorates or representatives.

Whatever "union" results from such base foundations has little chance of enduring, and great chance of spawning discord and the radicalization of the disenfranchised.