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.
JOHN ROSENTHAL: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.
Advertisement
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.
Good luck to herr Doktor Kerber and kudos to NRO for giving us real information about the economic travesty that is the EU. Sadly, his effort will probably come to nought. I fear the powers that be in the EU have corrupted the courts as well. Just the concept of "privileged plaintiffs" with the privilege based on political standing rather than legal standing should give everyone pause.
It amazes me that you focus on this, which you identify as illegal, when the occupation movement has been highlighting plenty of immoral and illegal activities right in your own backyard. Perhaps you should focus on that instead of this distraction.
I respect Mr. Kerber's economic take, but I'm less moved by his legal arument.
It's rather amusing to hear someone complain that the ECB lacks "checks and balances." Lamenting the absence of accountability in the EU is a bit like lamenting instability in South America or women's rights in Saudi Arabia. NO KIDDING!
This ain't over yet. The bond holders are going to lose %50 of their investment. I suppose there are those on this site (and you know who you are) who will think this is just fine. After all, what's yours is mine and what's mine is mine plus what comes to me from taking what is yours.
But there are also a lot of small investors and pension funds and the like who also are getting hosed. These people have worked and saved for their retirement and they are going to get it in the neck. Bugger thy neighbor on steroids. And if those investors are insured by their respective governments then all the taxpayers in those countries just got the pleasure of paying for Greek's decades of fun in the sun.
I will be fascinated to see what sort of interest rates the Greeks will have to pay in the future now that the policy has been established of taking huge loans at cheap interest rates, squandering the money on feckless and irresponsible government policies and then simply reneging on the obligation. I am sure there will be plenty of investors lining up to have half their money stolen yet again. Governments and the electorate can be fooled over and over again. Investors tend to have sharp memories.
Furthermore, the EU has not only provided this $140 Billion dollar right down but has also loaned Greece another $140 Billion to 'right their ship.'
We will be revisiting this soon enough. The Greeks are not going to change their ways and the EU just sent another $140 Billion down the same financial rat hole.
Next up Spanish and Italian bonds for sale! Any takers?
The desperate hang on, because they cannot see any other alternative. All this does is delay the inevitable and make it more expensive. It also manages to buy the US more time.
It is time to write off not only Greek debt, but the entire continent of Europe. The parasitic EU plutocracy will never abandon its privileges as totalitarian overlords of their fairy tale European empire. The people at large have already pawned their past and future to avoid facing the fact that their idiotic welfare state is a fantasy. It's over. Divest now. The horrors of total economic collapse now are nothing compared to a deferred collapse ten or twenty years from now. That's where the Euro-socialist fantasy has led them. Widespread civil war would actually be a sign of health at this point - at least it would indicate that somebody cared about their own future instead of merely clinging to cherished delusions. Today's problems are only the harbingers of the demographic shock approaching. The successor population is not even interested in perpetuating anything remotely resembling the thing formerly known as "Europe".
I appreciate Mr Rosenthal bringing this to light as it has been obvious that this type of information would not be divulged on the BBC or any other major news programs. I just can't understand how it is possible that the EU can't even follow it's own rules concerning monetary policy. This is totally political subterfuge at it's worst.
This is a known known. Here is a (paint by number) German view of the 'bailout' posted on 29 September: External Link
As for the default that is not a default follow the parcel that's getting passed via the daisy chain of financial/governmental 'EU' institutions, IMF, ISDA (and its TBTF card carrying members), 'creative' accounting, Hypo Real cash in the bottom drawer, and tremble it doesn't end at the biggest printing press of all for on the final pass.
Keep repeating, ceci n'est pas une debt.
Again, happy debt to GDP max out Halloween.
We all see what suits us. What about those illegally large German deficits in the early euro years and the tiny interest rates designed to help Germany and inflate the periphery? The euro project was sold as part of EU integration; if the Germans so disliked the huge market for their cars created by the euro they should have piped up sooner.
Do you think any European citizen knows who his EU rep is? Do they know who the EU president(s) is/are and what he does? Do you think they actually care about this? People like to deride American ignorance and apathy about his lack of civic knowledge, but this is more true in Europe since there are so many layers.
In sum, each countries' laws are irrelevant for the interests of the EU2 and the "grand project" and limp soft power. They are more concerned about their ageing population and immigration more so.
At least they can't say the US is the only country that has China holding their debt over their heads anymore...
The EU violated the letter of its treaties before the ink was even dry. So what? The EU is a political project intended to re-establish the Roman Empire. A financial crisis was part of the plan from the beginning. The Euro's founders understood the inherent flaws, and how the inevitable crisis would allow then to force the States into "ever closer union". Everything is proceeding according to plan. Everything is working as intended. Rosenthal has no case.
