GERMANY AGAINST THE ECB / “The fragile euro is saved (for now) only thanks to Draghi”



The disruptive effects of the Karlsruhe ruling are beginning to be seen. According to the Reuters agency the ECB would be preparing an emergency plan to deal with its program of purchases of government bonds – and therefore of aid to countries in difficulty – without the Bundesbank. This is due to the ruling of the German Constitutional Court, which asked the ECB to justify the extent of its purchases by the beginning of August or to continue the program without the Bundesbank. Precisely for this reason, “the staff of the ECB – Reuters reports – and the national central banks of the euro area are preparing for what a source called ‘incredible’: a scenario in which the court forbids the Bundesbank to take part in the purchases” .

It is clear that the euro has never been at risk like it is now. According to Alessandro Mangia, a professor of constitutional law at the Cattolica of Milan, the Euro-hornet will continue to fly, despite the “planning holes” of the European system. And it will not fall either because the ECB will keep it on its feet, or “because at this moment there is no interest in causing it to fall, neither in Europe nor outside Europe”.

The ECB would be preparing an emergency plan to deal with its purchasing program without the Bundesbank. What do you think?


I see it as a sign of efficiency. Paradoxical as it may seem, the preparation of consequent scenarios and lines of action is part of the work of each central bank. And it is appreciated that this is done.

But what message is sent?

Look, just a few years ago we were scandalized on live television that someone was thinking about Eurozone breakdown scenarios. In reality, each central bank must have lines of intervention to be activated in case of need. It is part of its stabilization functions.

Even of an anomalous central bank like the ECB?

Certainly. If anything, the oddity is that we talk about it on Reuters. It is clear that if you pass such news to Reuters it is because you want this to be known around. I believe it is part of a confrontation strategy that started a week ago and has not yet subsided.


At the same time, the ECB “would have filed a lawsuit against the German central bank, its main shareholder, to bring it back into the program”. ECB, Bundesbank, German Parliament. Which institution is most in difficulty and why?

That’s what I was telling you now about the confrontation strategy that started the next day the Karlsruhe depot. The Commission has started to talk about possible infringement proceedings against Germany for a ruling by its Constitutional Court. I found it very inappropriate, bordering on naivety. And I hoped it was quickly forgotten.

And instead?

Instead, both at the Commission level – which in its current composition is revealing impressive limits of strategy and leadership – as at the ECB level, this point is insisted. They are people who do not know – or pretend not to know – how the EU system is built and what theirs are design holes.

How do you explain this guilty or faultless gap?

This is explained by the fact that these are mainly economically trained officials who are not equipped to understand what the limits of the European system are. And the risks of constitutional conflict inherent in every federal structure. Even of a structure that wants to replicate the functioning of a federation without being one.

In your opinion, what is the error of European mandarins?

They really believe that the Court of Justice is the closing court of the EU system. And they have no historical or institutional culture. Because mostly of Germany they know neither the language nor the constitutional history. It is essentially a quality problem of the European functionary. You graduate in economics at some universities around Europe, do some masters degrees, and enter the career ladder.

A suggestion?

Find out what the Prussia versus Reich conflict was and what it led to. As Giulio Sapelli well says, Europe is governed by people who trained on the double game, so they believe they can go to the clash between courts believing they will win it, treated in hand, because “you know how these things go”. We would like to answer “Greetings” and have a laugh, except that we are in the middle too.

But how can one explain that the Karlsruhe ruling has generated effects that in terms of their autonomy and decision by parliaments, courts and central banks appear out of control?

At the moment I’m not out of control yet. These are just words of those who are discovering the limits of a functional replica of a federation. And he risks finding out in the worst way, raising his tone. But yesand you want to marginalize politics and reduce it to a screen, you must at least train your officials well. The British knew how to do it until the time of their empire, so much so that the backbone of British power was formed in Oxford and Cambridge.

And in Europe?

In Europe, however, those who believe they live in a federal state, in the name of the “European dream”, have been produced. It must be admitted that the Europhile propaganda of these years has played a role in the training of this staff and in its quality.

The euro is also a political institution in its own way. How much does it risk?

It has been known since the 90s what an optimal monetary area is, what its limits are and what its advantages are. Before they were only things for scholars of the economic sciences. Do you remember the phrase that the euro would have been a hornet?

Even the bumblebee should not fly, according to the laws of physics, yet it flies, etc.

Let’s say that the bumblebee has continued to fly in the last 10 years thanks to continuous measures, and the creation of one parallel economic constitution, notwithstanding what is written in the Treaties. And the creator of this constitution was Draghi. Now that the quality of the ECB’s top officials has changed, the bumblebee is struggling.

Could it fall?

No, it won’t fall because right now there is no interest in dropping it. Neither in Europe nor outside Europe. And it is outside Europe that the existence of the euro is truly at stake, despite the ridiculous self-reference of the debate taking place between Berlin, Paris and Frankfurt. It is not clear that the euro should be placed in a much broader framework of issues on the Mes or the Recovery Fund. And it depends on the Treaties, which are a very fragile construction, despite the propaganda with which Commission officials are imbued.

But not those of the ECB.

No, because in the ECB they are much, much more warned. And they know they are moving in a glass shop. Which depends a lot on Fed, Bank of England and Bank of Japan. Because they have to do with them every day. These four banks stabilize the global financial framework. Not the Commission or the European Council, with their Excel spreadsheets who are leading a continent to crash with their statements. What do they do if the German court orders the Bundesbank to step back in three months? They are people who don’t realize. And for this reason in the ECB we rightly equip ourselves.

The fact is that the German Parliament seems divided between the Community system, the Eurosystem and the fundamental law. What will you choose? Or have you already chosen?

Believing that the Karlsruhe decision was taken in disagreement, or only without the knowledge of the federal government, is something that can be thought of in Italy. And in some misinformed newspaper. The German Court has always played a leading role in the strategies of the Federal Government and has always been very consistent in affirming the primacy of the Federal Constitution on the Treaties, since 1993.

So in Germany the ideas are very clear.

Sure. We agreed to take the euro to reunite us – they think in Berlin – but the cornerstone of the Maastricht pact was the ban on debt mutualisation. You have been forcing the pact for 10 years. Now we ask you to respect it, in the name of our constitution. So nothing purchases beyond the capital key (the stake in the ECB) and no mutualisation of the debt. Schäuble’s latest statements come to mind …

“If we fail in the face of this crisis, Europe’s time is at an end. We are not mutualizing the old debt, “he said of the Recovery Fund.

The Recovery Fund could be done precisely because it would not be mutualisation of past debt. But this testifies to the play of forces already underway within Germany. Imagine out, given the plurality of actors on the field. On the other hand, if you rely on a bureaucratic and economic polyarchy to govern a continent, the results can only be the end.

I quote from Financial Stability Review of the ECB: “If the measures taken at national or European level were deemed insufficient to preserve the sustainability of the debt in some countries, the assessment of the risk of renaming on the markets could increase again”. How do you comment?

The BTP auction in recent days has amazed the sector operators. The chief economist of Unicredit, Erik Nielsentwo days ago, he explained the overall sustainability of our debt, which is based on the enormous wealth deposited in Italian banks and owned by Italians. A reminder of the recent past, of course, and of the Japanese propensity to save in the past. But in these coronavirus months the level of deposits has even increased. Spread swings are always possible, because this is implicit in European monetary architecture, but nobody has an interest, at the moment, in pressing the accelerator.

So if the Italian problem is not the scarcity of resources, then what is it?

It is the inability to find a political class first, and a ruling class then, that can mobilize these enormous resources in the interest of the country. If there were, the country would also trust.

And how come there isn’t?

It is one of the many gifts of Tangentopoli.

(Federico Ferraù)


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