Perhaps my greatest concern is that the Karlsruhe ruling will lend credibility to brexiteer claims that the EU is too dominated by Germany. For a long time the deal has been that while Germany dominated the ECB in Frankfurt, France had greater sway with the Parliament in Strasbourg and the Commission in Brussels. That ended with Draghi as ECB President and now the roles are reversed with Ursula Von Der Leyen President of the Commission and Christine Lagarde President of the ECB.
The role of the ECB's Chief Economist, Philip Lane, could be crucial in deciding how the future unfolds:
"The whole point of having flexibility is that you can deviate from the capital key," Prof Lane told an online interview with the Institute of International Finance.
That would potentially allow Germany's central bank to stop buying German bonds under PSPP and buy more of its own and other countries' bonds under the PEPP scheme. Other member states could shift their purchases in the opposite direction, buying German bonds under PSPP to maintain overall spending.
Although infringement proceedings against the Bundesbank if it fails to participate in future rounds of QE are possible, Lane's instinct is probably to avoid confrontation with the German court and thereby placing the Bundesbank in a difficult position.
Reuters reported on Tuesday the ECB is drafting contingency plans to carry on with QE if Germany is forced to quit the scheme, citing four sources.
In this worst-case scenario, the ECB would launch an unprecedented legal action against the German central bank, its biggest shareholder, to bring it back into the programme, said the sources, who spoke on condition of anonymity.
That case would be heard by the European Court of Justice in Luxembourg - whose views on the issue the original German court rubbished. The case would potentially test Germany's political commitment to the euro institutions.
Most of the sources cited by Reuters expect the legal challenge from the court in Karlsruhe to be resolved by the Bundesbank itself demonstrating that the ECB had considered the proportionality of its policy .
But staff at the ECB and the eurozone's national central banks are preparing for what one source described as the "unbelievable" scenario in which the court bans the Bundesbank from taking part in the purchases.
In that case, the ECB, or less likely the other eurozone central banks, would take up the Bundesbank's quota in the PSPP and buy German bonds, the sources said.
At the heart of the dispute is the GCC's economic illiteracy, never mind ignorance of how central banks the world over operate. Perhaps a briefing from the Bundesbank can help to resolve that. But in the longer term if the Bundesbank starts to diverge from the collectively agreed decisions of the ECB board there can be only one outcome: Infringement proceedings against Germany up to and including the possible expulsion of Germany from the Eurozone. That should concentrate minds wonderfully. Weimar here we go again.
The reality is that the ECB and Central banks the World over aren't really democratic institutions, being composed of bankers and economists appointed by governments but not really answerable to them. Trump has sought to brow-beat the Fed into reducing interest rates before it was ready to do so, but the Pandemic has now rendered that conversation moot. Everyone recognises the need to reflate after the greatest financial shock in almost a century.
Everyone but, perhaps, the GCC. Perhaps even they are embarrassed by the way in which the Pandemic has now exposed the vacuousness of their arguments. Interest rate and money supply decisions are left to central banks for a reason: they require great monetary and economic judgement and expertise. Amateur ordoliberal economists acting as judges need not apply.
I don't really expect my letter to the Editor to have much impact beyond raising the awareness of some Irish people to a potentially serious economic and political issue. The Irish government may have a quiet word with its German and EU counterparts, but everyone will be keen to avoid another crisis. The arrogance of the GCCs dismissal of the CJEU and 60 years of case law has shocked and embarrassed many. Let us hope that Hungary and Poland are not similarly emboldened to reject CJEU findings against their undermining of judicial independence, because then we will have a real and immediate crisis on our hands.
And the irony is that the GCC is supposed to protect German democracy against totalitarian takeover. It would be a tragedy if such well intentioned independence led to Germany helping to undermine democracy in Hungary and Poland and the democratic legitimacy of the EU as a whole. Maybe the Brexiteers were right after all: without a stronger Demos and Logos the EU is destined to fail.