A German court has plunged the eurozone into fresh crisis

An epidemic has been raging across the continent. The economy is in lockdown, and GDP is in freefall. But, hey, just when you thought things couldn’t get any worse in the eurozone it now has a financial and currency crisis as well, and one that is being made worse by the week with the shambolic management of the European Central Bank by Christine Lagarde.

Today, the German constitutional court has, at least in part, ruled against the ECB’s bond-buying programme, which allows the central bank to print money and effectively bail out Italy, Spain, and probably quite soon France as well. You need to be a German lawyer – not usually among the most interesting people on the planet – to unpick the finer points of the ruling.

But, stripped of the finer points of the law, it basically boils down to this. The Bundesbank won’t be able to participate in the ECB’s bond-buying programme, at least not unless either the law or the treaties are changed. Sure, the ECB could carry on regardless, but the German central bank won’t be a part of it. And since that is where all the money in the eurozone comes from, good luck with that. It is as if the Bank of England couldn’t print any money unless it excluded London. The chances of success would be very slim.

We will see how it works out from here. ‘The men and women on Germany’s Constitutional Court are neither daft nor tone-deaf and they know that they have just stepped on a political landmine,’ argued Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics in an analysis today. ‘In other words, they have not just put the ECB on the spot, but also Germany’s politicians. It’s not easy to change the constitution in Germany, but that may be what is required here.’ In other words, it’s a mess, and at a moment of maximum danger, no one knows anymore what the central bank can or can’t do anymore.

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Πηγή: spectator.co.uk