Alemania, Eurolandia eta EBZ-ren ‘ilegalitatea’

Bill Mitchell-en BVerfG decision once again exposes the sham of the Euro system


(i) Hasiera gisa

… I would briefly comment on the yesterday’s – Decision – by the Bundesverfassungsgericht (German Federal Constitutional Court) (May 5, 2020) on the legality of the ECB’s Public Sector Purchase Programme. The BVerfG concluded that the ECB has been operating ultra vires1 and made orders as appropriate, which bind the German government and the Bundesbank and demonstrate once again the myth of central bank independence. There is all sorts of angst being expressed out there about this decision and progressive Europhiles are almost apoplectic. But it won’t surprise you to know that I think the Court made the correct judgement by exposing the complete sham that the European Union and the Eurozone, in particular, has becomean illegal, look-the-other-way, neoliberal cabal that the Union has become.

(ii) BverfG delakoaren erabakia eta haren ondorioak

The BVerfG decision and its implications

I have written about his issue previously – European Court of Justice effectively rules that Eurozone is a shambles (June 29, 2015).

I also covered the matter in detail in my book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale (published May 2015).

Yesterday’s BVerfG decision was directed at the PSPP rather than the PEPP, although we can expect a new petition to the Court on the PEPP and the same principles will be entertained.

I haven’t yet read the complete decision – it is very long and I am about 3/4 the way through it as I type.

The – ECB decisions on the Public Sector Purchase Programme exceed EU competences (May 5, 2020) – press release is very detailed and gives one enough of the facts to be able to assess the facts and import.

The essence of the decision is that:

1. The BVerfG rules that:

the Federal Government and the German Bundestag violated the complainants’ rights under Art. 38(1) first sentence in conjunction with Art. 20(1) and (2), and Art. 79(3) of the Basic Law (Grundgesetz – GG) by failing to take steps challenging that the ECB, in its decisions on the adoption and implementation of the PSPP, neither assessed nor substantiated that the measures provided for in these decisions satisfy the principle of proportionality.

Proportionality is a ‘principle’ built into the TEU (Articles 5(1) and 5(4)) which relate to the “division of competencies between the European Union and the Member States”.

In this case, the intent of the ruling was to question whether the ECB’s behaviour was commensurate with its stated monetary policy objectives.

But it is clear that the Treaties never considered the ECB would play a major fiscal policy role, which in the climate of austerity imposed by the Commission on Member States, became essential if the common currency was to survive. See more below.

The point is that the Commission is now caught in a web of its own making.

On the one hand, it has made it impossible for Member States to maintain high levels of prosperity. Member States move between various degrees of crisis as they try to stay within the ‘unworkable’ fiscal rules.

On the other hand, the ECB, which was entrusted with monetary policy, has been forced by the austerity bias to become a sort of de facto fiscal agent, which the Treaties claim (via subsidiarity etc) is the sole domain of the Member States.

This is what the BVerfG is ruling against.

But in doing so, it is confusing the situation even more.

As point (3) below shows, the BVerfG doesn’t rule against the PSPP in the context of “monetary financing of Member State budgets”.

But the ECB is doing exactly that while whistling a different tune and everyone is playing along with the charade.

It seems the way the BVerfG is trying to get to this point is via the “proportionality” concept.

Importantly, the BVerfG considered the German government had not established whether the ECB’s legal mandate had been exceeded by the PSPP and “the Federal Government and the German Bundestag have a duty to take active steps against the PSPP in its current form.

Goodbye the pretence of central bank independence.

The Court didn’t exactly declare the PSPP to be illegal – it said that it couldn’t decide because the German government hadn’t done its job properly.

But, the Court ruled that:

the Bundesbank may thus no longer participate in the implementation and execution of the ECB decisions at issue, unless the ECB Governing Council adopts a new decision that demonstrates in a comprehensible and substantiated manner that the monetary policy objectives pursued by the PSPP are not disproportionate to the economic and fiscal policy effects resulting from the programme.

Expect more smoke and mirrors.

2. A major bombshell came with its ruling that the December 11, 2018 decision by the Court of Justice of the European Union (CJEU) on the legality of the PSPP is to be disregarded because:

The review undertaken by the CJEU with regard to whether the ECB’s decisions on the PSPP satisfy the principle of proportionality is not comprehensible; to this extent, the judgment was thus rendered ultra vires.

The BVerfG had originally sent the case to the CJEU, which had ruled that there was no reason to declare the PSPP invalid.

At the time, it was clear that the major issues the BVerfG had sought rulings on – which related to whether the ECB PSPP was compromising the democratic capacity of the German state – were not dealt with in the CJEU ruling and this is behind the decision by the BVerfG to assert that the CJEU has no standing in this matter.

That will have huge implications for Member States who want to go it alone. The media is already talking about rogue states like Poland and Hungary using their own judicial processes to declare EU law as espoused by the CJEU to be irrelevant to their nations.

Divergence is once again the hallmark of the whole show.

3. Surprisingly, “the Federal Constitutional Court did not find a violation of the prohibition of monetary financing of Member State budgets”.

The BVerfG was worried that:

if the Member States were to completely refrain from conducting any kind of ultra vires review, they would grant EU organs exclusive authority over the Treaties even in cases where the EU adopts a legal interpretation that would essentially amount to a treaty amendment or an expansion of its competences …

the Member States remain the ‘Masters of the Treaties’ and the EU has not evolved into a federal state.

This is where I believe the Court is mistaken.

(iii) EBZ-ren ‘ilegalitatea’ legala da

What the decision really highlights is the failed architecture of the monetary union.

As I have indicated before, when the ECB began its Securities Markets Program (SMP) in May 2010 to save Member States from insolvency as bond yield spreads against the bund were increasing sharply, it tried to claim that they were just engaging in monetary policy operations to manage liquidity.

Central banks use open-market operations (OMO) – exchanging government bonds for reserves in either direction with the commercial banks – to manage the reserves and maintain control of their policy target rates.

Please read the following introductory suite of blogs for more on this:

1. Deficit spending 101 – Part 1 (February 21, 2009).

2. Deficit spending 101 – Part 2 (February 23, 2009).

3. Deficit spending 101 – Part 3 (March 2, 2009).

But the SMP began the massive increase in bond holdings on the ECB’s balance sheet.

The obvious question that has never been answered – because the answer is obvious – is why did the normal operations of monetary policy and specifically liquidity management (reserve maintenance) require such a dramatic accumulation of assets after 2009?

After introducing the SMP program the ECB accelerated their purchases of Member State government bonds at times when the difference between the yields on some Member State government bonds against the benchmark bond, the German bund (the ‘spreads’) were widening significantly.

The initial spike in purchases from May 2011 was associated with the escalation in spreads on bonds issued by Greece, Ireland, Portugal and Spain.

A second, larger acquisitions began in August 2011 and were mostly associated with the sharp rise in the spread on Italian government bonds, which went from 1.5 percentage points in April 2011 to a peak of 5.2 percentage points in November 2011.

The large-scale ECB buying stabilised the Italian bond spreads by the end of 2011 and by April 2014, they had fallen back to 1.77 percentage points.

Given the size and importance of the Italian economy to Europe, the ECB was clearly not going to allow the Italian spreads to rise as quickly or as far as the Greek spreads had risen.

The SMP purchases effectively allowed the relevant governments to ignore the bond markets, which meant that the size of the spreads were moot anyway.

After the SMP was launched, a number of ECB’s official members gave speeches claiming that the program was necessary to maintain normal monetary policy operations (liquidity management).

For example, on October 21, 2011, ECB Board Member, José Manuel González-Páramo gave a speech in Málaga – The ECB’s monetary policy during the crisis – said that the huge government bond purchases were part of:

a functioning monetary policy transmission mechanism by promoting the functioning of certain key government and private bond segments.

In other words, by placing the SMP in the realm of normal weekly central bank liquidity management operations, they were trying to disabuse any notion that they were funding government deficits.

This was to quell criticisms, from the likes of the Bundesbank and others, that the program contravened Article 123 of the Treaty of the European Union.

In early 2011, the fiscally-conservative boss of the Bundesbank, Axel Weber, who was being touted to replace Jean-Claude Trichet as head of the ECB, announced he was resigning, ostensibly in protest of the SMP and the bailouts offered to Greece and Portugal.

I noted in my 2015 book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale – that Weber breached ECB protocols by publicly criticising the SMP program.

In a notable speech on October 12, 2010 in New York City – Monetary policy after the crisis – a European perspectiveAxel Weber claimed that the SMP was largely ineffective but risked:

blurring the different responsibilities between fiscal and monetary policy. As the risks associated with the SMP outweigh its benefits, these securities purchases should now be phased out permanently as part of our non-standard policy measures.

He clearly knew that the bond purchases were nothing to do with the daily liquidity management and reserve maintenance procedures of the ECB but had, instead, become a default fiscal intervention to fund Member State deficits and keep these governments from insolvency.

Another ECB Executive Board member, Jürgen Stark also resigned in protest over the SMP in November 2011. Stark told the Austrian daily, ‘Die Presse’ that the ECB was heading in the wrong direction by pushing aside the crucial no bailout clauses that provided the bedrock of the EMU.

Weber’s successor as head of the Bundesbank, Jens Weidmann maintained the criticism, albeit in a more muted manner.

Whatever spin one wants to put on the SMP and its later QE incarnations, it was unambiguously a fiscal bailout package.

Weidmann was correct in that sense. The SMP amounted to the central bank ensuring that troubled governments could continue to function (albeit under the strain of austerity) rather than collapse into insolvency.

The QE reality was that the ECB was bailing out governments by buying their debt and eliminating the risk of insolvency.

QE demonstrated to everyone, that the ECB was caught in a bind.

It repeatedly claimed that it was not responsible for resolving the crisis but, at the same time, it realised that as the currency-issuer, it was the only EMU institution that had the capacity to provide resolution.

The SMP saved the Eurozone from breakup and the later versions maintained the solvency of governments.

QE was never about giving the banks more money to loan out. Bank lending is never constrained by a lack of reserves. Rather lending requires credit-worthy customers seeking loans. At the height of the crisis as banks tightened their lending criteria in the face of increasing financial uncertainty, there was a dearth of such customers.

While the SMP saved the Eurozone from breakup, it remained a failed vision for European prosperity because it didn’t address the core problem: Southern Europe was in depression and the only way out is for fiscal deficits to expand.

The ECB clearly signalled a willingness to buy unlimited quantities of government bonds if there was the risk of insolvency. But this intervention required that the countries succumb to a fiscal austerity package that ensured their growth prospects are minimal.

And it has carried on that practice into the current PEPP bond purchases.

There is no doubt that if the ECB wasn’t engaging in this way, several Member State governments would be rendered insolvent Italy, Spain, probably Greece, Portugal and soon after France.

There is also no doubt the ECB is funding the deficits that are now growing substantially.

The primary bond dealers know they can offload the debt at a nice capital gain to the ECB so have no fears of credit risk.

The BVerfG is also choosing to overlook all this.

The ECB put out this press release in response (May 5, 2020) – ECB takes note of German Federal Constitutional Court ruling and remains fully committed to its mandate.

Essentially saying that we have read the judgement and will continue to do what we are doing anyway.

They appealed to the authority of the Court of Justice of the European Union (CJEU), which ruled in December 2018, that the ECB’s smoke and mirrors behaviour that everyone knows is illegal is legal.

The German court decision indicated that the CJEU “clearly fails to give sufficient effect to the principle of conferral and paves the way for a continual erosion of Member State competences.”

The decision also has consequences for the on-going Brexit negotiations.

There is no way that the EU’s negotiator (Barnier) can insist on Britain agreeing to punitive ‘single market’ rules when the way policy is evolving across the Continent suggest that Member States are certainly trying to do their own thing.

What a system!

Iruzkinak (3)

  • joseba

    Il colpo di stato giuridico della Corte di giustizia europea

    di Thomas Fazi

    8 maggio 2020

    Oggi è arrivata la risposta della Corte di giustizia europea alla sentenza della Corte costituzionale tedesca che – come abbiamo già spiegato – giudicava il programma di acquisto di titoli pubblici della BCE incompatibile con i trattati europei.

    La replica della Corte di giustizia europea è decisamente inquietante. Essa infatti non entra nel merito della sentenza tedesca ma si limita a ricordare che «in base a una giurisprudenza consolidata della Corte di giustizia, una sentenza pronunciata in via pregiudiziale da questa Corte vincola il giudice nazionale per la soluzione della controversia dinanzi ad esso pendente», affermando poi che «per garantire un’applicazione uniforme del diritto dell’Unione, solo la Corte di giustizia, istituita a tal fine dagli Stati membri, è competente a constatare che un atto di un’istituzione dell’Unione è contrario al diritto dell’Unione». Per questo motivo, conclude la Corte, «i giudici nazionali sono obbligati a garantire la piena efficacia del diritto dell’Unione», limitandosi a recepire nel diritto interno le disposizioni della Corte di giustizia europea.

    Difficile immaginare un sunto più efficace del «colpo di Stato giuridico», secondo la definizione del giurista internazionale Alec Stone Sweet, messo a punto con la creazione dell’Unione europea (UE). Qui, infatti, non ci troviamo solo di fronte a un’architettura istituzionale che, per mezzo dei trattati europei, ha creato un diritto vincolante per gli Stati membri, determinando così un complesso processo di reingegnerizzazione oligarchica del potere attraverso il trasferimento (la “costituzionalizzazione”) dei princìpi cardini del liberismo nelle singole costituzioni nazionali, progressivamente svuotando di senso queste ultime, nella misura in cui questo processo ha, de facto se non de jure, reso impossibile il perseguimento di tutta una serie di obiettivi sociali consacrati nelle suddette costituzioni (esemplare, in questo senso, il caso italiano).

    Ma, fatto forse ancor più inquietante, ci troviamo di fronte a una Corte di giustizia europea che – come emerge chiaramente da questo comunicato – ormai (in realtà da tempo) non si limita più a verificare semplicemente la conformità delle decisioni politiche con il quadro normativo europeo, ma di fatto, attraverso un’interpretazione “creativa” dei trattati da cui deriva la sua stessa legittimità, si arroga il diritto di produrre ex novo un diritto vincolante (quantomeno dal punto di vista della Corte) per gli Stati membri, anche se in difformità rispetto alla normativa comunitaria, senza che i singoli Stati (e le rispettive corti costituzionali) possano mettere bocca. È evidente che siamo di fronte a una mostruosità giuridica senza precedenti.

    Non a caso la Corte costituzionale tedesca aveva – giustamente – sottolineato che «se gli Stati membri dovessero astenersi completamente dal sollevare [eventuali elementi di non conformità con il diritto europeo, indipendentemente dal giudizio della Corte di giustizia europea], concederebbero agli organi dell’UE un’autorità esclusiva sui trattati anche nei casi in cui l’UE adotti un’interpretazione giuridica che equivarrebbe essenzialmente a una modifica del trattato o a un’espansione delle sue competenze».

    Risulta veramente difficile non dare ragione ai giudici tedeschi in questo caso. Anche perché non si tratta solo di un problema “procedurale”, ma di una questione che investe di pieno diritto la questione della legittimazione democratica del diritto. Come nota infatti Alessandra Algostino, professore associato di diritto costituzionale all’Università degli Studi di Torino: «Ciò integra un vulnus rispetto a vari elementi chiave di un ordinamento democratico; per citarne alcuni, la separazione fra i poteri, lo Stato di diritto, la legittimazione democratica del diritto».

    Le problematiche legate all’autolegittimazione della Corte di giustizia europea (e dunque del diritto europeo), «derivano in ordine all’esautoramento, non tanto della sovranità in sé, quanto della sovranità popolare (stante il citato deficit democratico delle istituzioni e dei processi decisionali in sede di Unione europea, per tacere del possibile contrasto fra i principi fondanti l’Unione europea e i principi fondamentali della Costituzione)».

    Conclude dunque Algostino: «In questo senso è evidente una radicale discontinuità fra l’ordinamento comunitario e gli ordinamenti delle costituzioni europee del secondo Novecento e, in specie, quello italiano, fondati sul riconoscimento del pluralismo sociale e politico, sulla sua rappresentanza, sulla prospettiva riequilibratrice e redistributiva dell’eguaglianza sostanziale. I processi delineati hanno progressivamente smussato le tensioni fra l’ordinamento dell’Unione europea e gli ordinamenti statali, ma non nel senso di una costituzionalizzazione dello spazio europeo, bensì, nel senso, inverso, di una de-costituzionalizzazione dei territori nazionali».

    Le moderne repubbliche costituzionali, infatti, si differenziano dalle precedenti monarchie assolute proprio per il fatto di non essere l’atto di volontà di un sovrano legittimato dall’esterno – dalla tradizione, dal diritto divino, dalla forza bruta del Leviatano – ma di essere legittimate dall’interno da un popolo come soggetto autonomo che legifera su se stesso. Da qui l’evoluzione moderna del concetto di sovranità, innervato nella nostra Costituzione, inteso non più (semplicemente) come sovranità statuale e nazionale, bensì, appunto, come sovranità popolare.

    In tal senso, il processo di sovranazionalizzazione del diritto implicito nei trattati europei, dacché presume un trasferimento del potere costituente a istituzioni prive di reale legittimità democratica o popolare, rappresenta per certi versi un ritorno all’era pre-repubblicana dei Leviatani che amministravano il diritto in maniera autoritaria in virtù di una propria autolegittimazione.

    UE delenda est.

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