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ECB won’t reply to German judges.

May 8, 2020

May 8, 2020

ECB: who let the judges out?Dmitri Demidenko

**German Constitutional court’s verdict on QE program looks

strange**

After Donald Trump afforded to criticize the Fed and speculate about the pros and cons of a weak and a strong dollar, many dream of following his example.  Germany’s Supreme Court made another attempt to hog the blanket: it demanded that ECB should justify the appropriateness of its €2.7 trillion QE program launched in 2015. If the ECB fails to do that, the Bundesbank will no longer participate in it. Following Trump, Karlsruhe’s lawyers might have understood life is a dog sled: the landscape is always the same unless you’re the leader.

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Dance like no one’s watching, sing like no one’s listening and express your opinion as if you’ve been asked to. The verdict of Germany’s Constitutional Court shocked both ECB investors and plaintiffs themselves. The latter didn’t really believe in the success of their affair after the ECB said the QE program was legitimate. But German judges not only played a dirty trick on the ECB, but also opposed EU principles and norms by overruling the decision of the European Court.

the Executive Board isn’t planning to reply. First, it would undermine the ECB’s independence: they would have to justify every step they make in future if a regional court asked them to. Second, everything has been explained on the ECB’s site already.  And can’t they really understand that QE is meant for fighting with the pandemic?

- I can’t be that dumb.

- You underestimate yourself.

According to Christine Lagarde, the current terms are exceptional and they allow the ECB to go beyond the scope of usual instruments.   The ECB is an independent establishment accountable to the European Parliament. It will go on doing what it has to do based on its own mandate.  The Frenchwoman made the judges in Karlsruhe understand the ECB wasn’t going to react.

Germany’s High Court did recognize that QE wasn’t a direct government financing program. That weakened the euro, but didn’t allow it to collapse.  It would have been strange if German judges had spoken of a union between monetary and fiscal policies while the ECB was doing all the dirty work and the German Ministry of Finance was being cheapskate. Money doesn’t disappear into thin air. It just changes its owner.

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Anyway, the German verdict stirred up financial markets, as Donald Trump’s verbal interventions did in 2017-2020.  The ECB has three months for explaining why its QE program has more benefits than shortcomings. There are so many people eager for ruling. But few are those who strive for work.  The Executive Board will keep silent, the European Court is bewildered and the euro got hit in the jaw. How will we work that shit out, dear Europeans? Perhaps, like Donald Trump who declared the USA was about to create a vaccine against Democrats’ electoral victory?

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Price chart of EURUSD in real time mode

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The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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