The Euro Bailout Is Illegal
An interview with Markus C. Kerber


Last month, in a unique “citizen’s challenge” to rescue measures taken by the European Central Bank (ECB), German economics professor Markus C. Kerber filed a complaint against the bank before the Court of Justice of the European Union. Professor Kerber, who teaches economics and law at the Technical University in Berlin, charges that the bank, under the leadership of outgoing director Jean-Claude Trichet, has exceeded its mandate and violated EU law by buying up government bonds from Portugal, Greece, and other financially troubled Eurozone states. He argues that the only way to save the Eurozone is to split it in two. National Review Online contributor John Rosenthal interviews him below.

: What are the grounds and the motivations for your complaint against Jean-Claude Trichet and the European Central Bank?

MARKUS KERBER: Our aim is to make clear that Jean-Claude Trichet has transformed the European Central Bank into a “bad bank.” He has done this in the context of the financial crisis by deciding upon what he called “temporary” measures: first of all, in order to save banks — which is normally part of the competence of the EU member states — and, secondly, by conducting an outrageous policy of so-called qualitative and quantitative easing. By designating all government bonds issued by Ireland, Greece, and Portugal as being eligible for ECB refinancing operations, Trichet has accepted risk that he never ought to have accepted.

These “temporary” measures have now become the steady policy of the European Central Bank. This has nasty consequences for the balance sheet of the euro system, but it also has entirely unacceptable consequences for the political independence of the ECB. The bank no longer has the power to say yes to rescheduling Greek debt, for instance, since if it did so, the writes-offs within the balance sheet of the euro system would be enormous.

We want to see if the European legal system is capable of sanctioning the bank’s behavior and the behavior of Mr. Trichet. The European Central Bank’s violation of the European treaties is obvious. Article 123 of the Treaty on the Functioning of the European Union expressly prohibits state financing through the ECB by the purchase of government bonds on the primary market. But even purchases on the secondary market are not allowed inasmuch as such measures go beyond the monetary fine-tuning known as open-market policy. The ECB is quite clearly intervening for fiscal reasons, not for monetary ones. So Trichet is out of bounds. Apart from the distortion of competition between banks that it creates, qualitative easing also breaches Article 124, because it establishes priority access to ECB financing. That is clearly prohibited.

But the so-called “privileged” plaintiffs — the European Parliament, the Commission, and the EU member states — have in fact done their utmost to circumvent the very normative pillars of the European Monetary Union. [Under EU law “privileged” plaintiffs, unlike “non-privileged” ones, may challenge measures taken by European institutions even if they are not directly affected by them.] They have organized themselves into a cartel and encouraged the ECB to do what it has done in purchasing bonds from Italy, from Spain, from Ireland, and from Portugal. If a private citizen such as myself is not admitted as a plaintiff against the bank, then the bank can do whatever it wants and there is no legal control — no checks or balances.


Sign up for free NRO e-mails today:

NRO Polls on LockerDome

Subscribe to National Review