European democracy has "gone to the dogs" as a result of European Central Bank sovereign bond buy-ups, according to critics of the policy at Germany's highest court yesterday.
However, ECB official Jörg Asmussen defended the bond-buying programme, known as outright monetary transactions (OMT), as essential to counter last year’s financial market “turmoil” over fears of an involuntary euro break-up.
A second day of testimony continues today in Karlsruhe into whether the programme, if and when it is activated to allow ECB buy-ups of sovereign bonds from financial traders, poses an unacceptable financial risk to German taxpayers.
Constitutional challenge
The court case in Karlsruhe reunites nine complainants who, last September, lost their constitutional challenge against German participation in the €500 billion European Stability Mechanism (ESM) bailout fund.
"While the ECB bathes in the glow of its success, the public looks on impassively as democracy has gone to the dogs with this kind of 'euro rescue'," said Prof Dietrich Murswiek, representing the lead complainant and Karlsruhe veteran Peter Gauweiler, a Bavarian politician.
Prof Karl Albrecht Schachtschneider, representing the economist Joachim Starbatty, said: "We expect that the constitutional court will end this euro misadventure."
Other complainants include Germany’s Left Party and “More Democracy”, an association representing 37,000 citizens.
Disregard ban
They told the court they were concerned that the OMT marked the latest crisis-era attempt by the ECB to disregard its explicit ban on financing of euro states. They cited last February's deal to recast Ireland's promissory notes as the latest example of such a policy by the Frankfurt bank.
German finance minister Wolfgang Schäuble told the judges that Berlin saw “no sign” that the OMT measures violated the ECB’s mandate.
“I find it hard to imagine that German courts can rule on the legality of ECB actions,” he warned.
“That would create a danger that the ECB would be given contradictory legal rulings from various constitutional courts within the currency union.”
