Eurocrash: ignoring the noise
Monday 10 September 2012
First we go to the Stark interview, where he is asked how he rates the decision of the ECB governing council to give permission to Draghi to buy government bonds from trouble countries. Stark asserts that for such a far-reaching decision, the ECB is not a legitimate body, "because that means a financial transfer to those countries from the rest of the area without the approval of their parliaments".
Now we cut to FAZ with its report, which tells us that the "ESM could hurt budget law". This is the finding of the German parliamentary research services, whose lawyers have found that the ESM creates a "possibly direct and potentially unlimited liability" for the debts of other states. This, they say, violates the German parliament and its budget law.
This is effectively what Weidmann was saying at the end of August, declaring that: "In democracies, parliaments should decide on such an extensive pooling of risks, not central banks".
Most likely, then, the constitutional court will be looking in this direction - as flagged up by Marie-Christine Ostermann of the Association of Young Entrepreneurs, in early August. Her body wants an ECJ ruling because, she said, Karlsruhe is too focused on the narrow question of the involvement of [the German] parliament.
Certainly, that is where the opinion lies, but later views, reported inter alia by Süddeutsche Zeitung, include the prospect of specifically limiting liability to a fixed sum.
Here the battlefield will lie, and the most likely outcome is that there will be constraints imposed as to how the ESM can be disbursed, which means that Mr Draghi will not get a free pass.
Bizarrely, though, the famed Draghi "bazooka" lies unused, the bluff still driving an ever-increasing bubble, with "investor sentiment" on the up. But, when the implications of the Karlsruhe judgement are absorbed, one can see sentiment just as quickly take a dive.
One thing we can ignore, though, is the increasing noise level, such as the self-publicising Soroswho is delivering nonsense on stilts which takes no account whatsoever of the political realities. Thesmall print is much more interesting, and that's where the things are beginning to happen in the real world.
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Richard North 10/09/2012
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