EU Australia Online - News & information from the capital of Europe direct to Australian businesses

Save-the-Euro plan clears a legal hurdle in Germany…

  • February 9th, 2014
  • Posted by EU Australia

EURO DOLLARGermany’s Constitutional Court, at Karlsruhe, came close on Friday to blocking continued joint intervention s by European Union states, to stabilise member countries in financial crisis.

It referred the matter for decision to the European Court of Justice at Luxembourg, after declaring a view somewhat favourable to the case put to it by the German central bank, the Bundesbank, which objected to the stabilisation program.

Said the Deutsche Welle news service:

“Known as the Outright Monetary Transaction (OMT) program and approved in September 2012, the deal allows the ECB to directly purchase the sovereign debt of struggling eurozone and EU countries. The move has been credited with stabilising the euro currency since its introduction, although critics ask whether it oversteps the bounds of a traditional central bank’s role in stabilizing currencies …

“The top German court said on Friday that there was good reason to think that the scheme ‘exceeds the European Central Bank’s monetary policy mandate and thus circumvents the powers of the member states, and that it violates the prohibition of monetary financing of the budget.’”

EU stabilisation policies staved off the worst of the sovereign debt crisis in Greece, and also in the other smaller economies of Cyprus, Ireland and Portugal, and to an extent in Spain; though unpopular in Germany as the major contributor to joint guarantees.

In setting up guarantees on national debt, those policies also supported continued use and strength of the joint currency, the Euro, which is sustained by member governments meeting set standards on such factors as interest rates and inflation.

Rules and agreements are still being extended and developed to equip the EU and the ECB to get early warning of any future crisis, and manage the defence of national exchequers, with again possible impositions and constraints on state budgets.

See EUAustralia Online: Germany’s new government; no easing of the economic headache in Greece, 21.12.13; Saving Cyprus, 26.3.13; EU heads meet: decisions on all fronts, 17.3.13; Germany and France want more ‘Europe’, 23.1.13.

Reference

Deutsche Welle, Bonn, German Constitutional Court refers ECB bond-buying to Europe’s top court, 7.2.14. http://www.dw.de/german-constitutional-court-refers-ecb-bond-buying-to-europes-top-court/a-17415656, (9.2.14).

Leave a Reply