From Open Europe news summary of September 5, 2014:
ECB surprises markets with rate cut and purchases of private assets;
Ruparel: Pressure rises on eurozone governments as ECB nears end of its policy tools
The ECB yesterday surprised markets by cutting interest rates and announcing a programme to purchase private sector assets, in the form of asset-backed securities and covered bonds. In his press conference, ECB President Mario Draghi said that the decision was not unanimous, with reports suggesting Bundesbank President Jens Weidmann was opposed. Draghi reiterated his call for flexibility in fiscal policy across the eurozone, but warned that structural reforms must come first. In response to the move, the euro hit its lowest level for 14 months and equity markets across Europe hit their highest point for six years.
Here is a direct quote from the Maastricht Treaty:
- Overdraft facilities or any other type of credit facility with the ECB or with the
central banks of the Member States (hereinafter referred to as ‘national central banks’)
in favour of Community institutions or bodies, central governments, regional, local or
other public authorities, other bodies governed by public law, or public undertakings of
Member States shall be prohibited, as shall the purchase directly from them by the ECB
or national central banks of debt instruments.
It is clear that the Maastricht Treaty, which created the European Central Bank, has been abrogated. It appears that Herr Weidmann, as president of the Bundesbank, opposes the ECB’s action, but what will he and the German government do? Will the Germans accept as legitimate what can only be described as an illegal action? The fate of the rule of law in Europe now rests in German hands. Patrick Barron