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It is indeed a modest proposal but you are right to credit Mutti, as this is a major shift in German policy which perhaps only she could get away with.

But I have some questions:

  1. Would the BundesBank be breaking any EU law/regulations if it refused to participate in repurchase programmes that had been agreed in accordance with the ECB's statutes? In other words, could the EU bring infringement proceedings against Germany? I appreciate any such actions could have political repercussions in Germany, potentially increasing support for the AfD, but that is hardly the ECB's problem. They had no difficulty over-ruling Greek and Irish proposed actions on debt restructuring and not bailing out junior bondholders in Irish banks, so why not over-rule German non-compliance as well. Or is Germany simply to big to be told what to do?

  2. Is the Merkel/Macron proposal for the EU to borrow and spend €500 Billion a direct response to the Karlsruhe ruling? I.e. they are at last beginning to recognise the limits of monetary policy (in both economic stimulus and legal terms) and choosing to provide a fiscal stimulus instead? It would be a nice riposte to judicial over-reach if it was: If you want to block the ECB from trying to prevent the EZ going into even deeper depression, we will just use more direct means...

  3. I had always thought the EU was legally barred from borrowing to fund its budget: was I wrong to think that, and if not, how has that legal obstacle been overcome?


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by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed May 20th, 2020 at 03:25:04 AM EST
For point 1, I don't imagine that EU sovereign banks would be needed to repurchase EU sovereign debt... Do US states need to guarantee US federal debt? I'm sure there would be plenty of market appetite.

Point 2 : I imagine that the German court ruling inspired them to short-circuit the ECB... which would have to further stretch its mandate if it were charged with raising the money, which would consist of direct monetary financing of the Commission's budget! (which is only OK if your an Anglo sovereign bank)

Point 3 : I dunno. And I'm too lazy to do the research.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II

by eurogreen on Wed May 20th, 2020 at 02:40:24 PM EST
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1. In other words, could the EU bring infringement proceedings against Germany?

The possibility has at least been publicly put on the table. By a former German minister, no less:
Ursula von der Leyen: Commission considering "infringement proceedings" over German court ruling against ECB

2. Is the Merkel/Macron proposal for the EU to borrow and spend €500 Billion a direct response to the Karlsruhe ruling?

According to Quatremer, this was Merkel's only way out: opposing Karlsruhe would trigger a constitutional crisis in Germany and siding with it would be dealing a  possibly deathly blow to the EZ and the EU. She might have come to a similar position sooner or later, something that Macron has been waiting for years (Sorbonne speech). It seems like the court's overly nationalistic overreach may have forced Merkel's hand.

3. No idea either :)

by Bernard on Wed May 20th, 2020 at 06:09:22 PM EST
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