The FT’s Gideon Rachman sounds the alarm:
The European Central Bank has fired its magic bullet. By promising “unlimited” purchases of sovereign bonds, Mario Draghi, the ECB’s president, may have kept his pledge to do “whatever it takes” to save the euro. But in rescuing the currency, Mr Draghi’s magic bullet has badly wounded something even more important – democracy in Europe.
But on this, Mr. Rachman is spot on:
As a result of the ECB’s actions, voters from Germany to Spain will increasingly find that crucial decisions about national economic policy can no longer be changed at the ballot box. In Germany, in particular, there is a growing realisation that the ECB, an unelected body that prides itself on its independence from government, has just taken a decision that has profound implications for German taxpayers – but one that they cannot challenge or change.
Previous European bailouts had to be approved by the German parliament and were subject to review by the German courts. Indeed the German supreme court will rule on the constitutionality of the most recent bailout, tomorrow. But the ECB’s decision to accept unlimited bond purchases is immune to such democratic controls. The bank cannot be overruled by the German parliament. And because it is an EU institution, the ECB cannot be checked by the German courts – only by the European Court of Justice.
At the ECB, the president of the German central bank has just one vote – the same as the presidents of the central banks of Malta or Slovenia. Jens Weidmann, the head of the Bundesbank, cast the sole vote against the bond-buying plans.
So why has Mr Draghi done it? The answer is that he faced a truly hideous dilemma. It was clear that the hundreds of billions of euros committed to European bailout funds have not been enough to ward off the threat of collapsing banks and sovereign defaults across the eurozone. A financial calamity could lead to another Depression, followed by political radicalisation – and a threat to democracy that is much more direct and unsubtle than the menace posed by the ECB.
But that’s too generous. A break-up of the euro (in all or in part) could indeed present enormous dangers, but the fact is that the dilemma has been made far sharper by the failure of the Draghi’s of this world to take any steps that ran contrary to the overarching ideological imperative of “ever closer union”.
Rachman concludes this powerful piece (those who can — it’s behind the paywall — should read the whole thing) with these words:
A great many things now have to go right simultaneously for Mr Draghi’s plan to work. It is rather more likely that political and economic unhappiness will grow in Europe over the next year – as Germany slips into recession and Italy and Spain (not to speak of Greece) struggle with ever deeper austerity. If the euro were ever to break up, the direct financial cost to Germany and other creditor nations – and the resulting backlash – could also be much higher, because of the ECB’s bond-buying programme. Certainly, for anyone with a sense of history, the sight of the German representative on the ECB being isolated and outvoted should be chilling. Since 1945, the central idea of the European project was never again to leave a powerful and aggrieved Germany isolated at the centre of Europe. We are now dangerously close to that point.
I wouldn’t stretch that comparison too far, but nevertheless . . .