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OMT Decision By EU Top Court Sets Europe On Renewed "Collision Course" With Germany
Last February, when relations between the ECB and the Bundesbank were comparable to those currently between the US and Russia (and then something dramatically changed for reasons still unknown but likely having to do with a deeper look inside the derivative books of Deutsche Bank, leading to a major backing down by Jens Weidmann), the German Constitutional Court took an aggressive approach with the ECB when it said that, in its judgment, the ECB's Outright Monetary Transactions program likely exceeded the central bank's powers.
"There are important reasons to assume that [the OMT] exceeds the European Central Bank's monetary policy mandate and thus infringes the powers of the member states, and that it violates the prohibition of monetary financing of the budget. Subject to the interpretation by the Court of Justice of the European Union, the Federal Constitutional Court considers the OMT decision incompatible with primary law."
However, instead of issuing a binding ruling, at that point the court quickly washed its hand of the consequences of having founds the OMT illegal, and referred the final decision on the legality of the European Central Bank's bond-purchase program to the European Court of Justice.
This is what we said over a year ago: "in doing so gave the ECB a panel of judges that is more sympathetic to the OMT and the central bank's ability to conduct monetary policy as it sees fit. It also killed two birds with one stone: allowed Germans to claims internally that the OMT is illegal, while everyone else in Europe gets to pretend that the continent is solvent, and that the ECB can backstop sovereign bond purchases with an imaginary contraption that contrary to mass delusion, simply does not exist and would fall apart the second it is used for the first time."
And, just as expected, earlier today the pro-ECB top European Union court found that Draghi's impromptu announcement of an OMT, which was basically the wrapping of his "whatever it takes" policy from 2012 to prevent the collapse of the Eurozone when peripheral bond yields were hitting daily records, was perfectly legal. From Dow Jones:
In its judgment on Tuesday, the ECJ said "this program for the purchase of government bonds on secondary markets does not exceed the powers of the ECB in relation to monetary policy and does not contravene the prohibition of monetary financing of member states."
The ruling isn't surprising, as a nonbinding opinion by one of the court's judges in January also said OMT was legal.
"This is a clear sign that the ECJ supports and defends the ECB's independence. This allows the ECB to continue on the real important things: quantitative easing and the Greek crisis," said Carsten Brzeski, chief economist with ING-DiBa.
As also expected, the ruling is set to rekindle tensions between Germany and Brussels, not to mention the ECB, over the implicit question that has always been the key one: "who decides the fate of Europe." From Reuters:
Hans-Werner Sinn, the head of Germany's IFO think tank and long-standing critic of the ECB, attacked the court for its "regrettable mistake".
Others, including Lutz Goebel, president of a German association for family-owned companies, were also critical of the ruling. "Through its actions, the ECB is going far beyond its mandate," he said.
The pro-ECB line could now set the European and German courts on a collision course.
Germany's Constitutional Court, asked to rule on complaints by the German group, had said there was good reason to believe the OMT broke rules forbidding the ECB from funding governments.
And then Bloomberg reported that Peter Gauweiler, a former German lawmaker who’s a plaintiff in a case against the ECB’s OMT bond-buying program, said he’s convinced that he can still block the measure in Germany’s Constitutional Court.
Gauweiler says he wants German top court to prohibit the Bundesbank from participating in the execution of the OMT program. "The ECJ even falls short of the opinion of the Advocate General, who at least viewed the linkage between the OMT program and the conditionality of the EFSF or ESM as an encroachment of the economic policy competencies of the member states."
So will this this vivid reminder that not all is well in the relations between Frankfurt and, well, Frankfurt, cast a pall of indecision over Europe at precisely the worst time, just as Greece is increasingly expected to Grexit, and when a united European response to the inevitable contagion and volatility will be so very critical to preserve the doomed monetary experiment? We may know the answer as soon as this weekend, when a repeat of the Lehman weekend, only this time in favor of Greece, is now looming.
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So the Bundesverfassungsgericht says its Ultra Vires, and most likely illegal, and instead of growning a pair and killing it, it punts it to the ECJ, where the ECJ says it isn't a problem.
The ECJ has no credability at all anymore.
Just EU growing pains.
EU Growing Pains? Lets hope this thing accidentally kills itself instead.
The ECJ has no credability at all. Lets see what happens when the OMT gets activateda & Hans Werner Sinn files another lawsuit?
Will the Bundesverfassungsgericht finanally draw a line in the sand, or will it accept its new role as something akin to the British Monarchy -- no power, little influence and there for name and tradition only.
Aren't Capital Controls also against EU rules as well? They are on a roll this week. Apparently laws are for the little people.
"Through its actions, the ECB is going far beyond its mandate,"
Yeah, well, suck it up, pal. There's a lot of that shit going on everywhere right now. The NWO has been having a field day since the '08 crisis and central banks have been leading the coup d'etat. Whocouldanodeit?
I'm not into theology but must say that whoever (John on an island?) came up with this end time stuff at least had a good idea of human nature and where it could lead. If anything, it reminds us we are animals, thinking animals with someone always wanting to dominate the herd not by muscle power but by brain power, evil brain power.
Behind the brain power there is the muscle power to enforce what the brain wants. Otherwise, others can simply ignore what all that brain power wants. Mao was right: power ultimately comes from the barrel of a gun.
two hoots a newbie shill. Don't be confused.
Thank you, two hoots. Imitation is the sincerest form of flattery.
I like you. Your tweedle dum is annoying though.
Gerxcit precedes Grexit!!
Who is first to leave the EU. Greece or Germany?
I wonder...
One would think that Germany would be screaming like a stuck pig at the threat of being robbed of their due, and to some extent they are, but not to the point of threatening to abandon the EU.
I look at Greece.Not long ago we saw their bonds pushing some extraordinary numbers in interest rates and yet people (banks) were still buying. We then saw them take what was ultimately a 90% haircut on those debts without seemingly as much as a whimper. And then we see them turn around and buy more on some illusionary promise that NO ONE believed true.
I think there are two things at play. One is that being in somewhat of a bind here, those holding these debts will still see something...anything, as better than nothing. The second thing is that while they are all screaming at each other Greeks, as well as all the rest, it's really not their money that is being evaporated. It is the stock holders and institutional players that they supposedly represent.
AS simply representatives for money and not actually playing with their money they still are at some risk here, but given what we have seen, they seem to have a captured market. For those needing returns on investment, there seems to be limited avenues.
Ultimately, I still believe this is a crisis CREATED to provide the opportunity for greater EU power. The loss of money that isn't theirs creates a sense of desperation that only greater powers, not lesser, elude to the capacity to give shelter. If things are going down the tubes, they we are still going to cling to the Too Big To Fail theme....too large to fit in the drain pipe.
those holding these debts will still see something...anything, as better than nothing...
Good Luck Texas.
http://www.azcentral.com/story/money/business/2015/06/15/petsmart-plans-...
PetSmart plans to lay off 15 percent of the employees who report to the company's Phoenix home office.
The move affects employees in all positions, whether they are in metro Phoenix or out in the field, said Michelle Friedman, PetSmart spokeswoman.
Friedman had no figure for the number of employees who will be affected. Severance packages will be offered, she said.
On Friday, CEO Michael Massey sent a letter to employees announcing the pet retailer's intent to restructure and consolidate.
Affected employees will be notified Wednesday, according to his letter, which also stated that the company had engaged consulting firm AlixPartners to review departmental structures, costs and staffing levels.
Equivocators always find a reason, and lawyers are professional equivocators.
buying worthless paper with worthless paper from people selected soley on the pretext that they will advance the illusion that said worthless paper has value in a phoney marketplace propped up by the same people that print the worthless CDS used as collateral leveraged 100 x that is on loan from the bank down the street that has the same collateral leveraged 50x.
I'm sure it will work out.
If, as seems likely, Greece exits the euro and defaults, leaving the ECB with a big smelly pile of worthless Greek government bonds it has taken on as collateral, it is going to be pretty hard to maintain the fiction that ECB actions do not "contravene the prohibition of monetary financing of member states".
Finland Ukraine China Korea Germany Russia Estonia England Congo Ecuador .... If you owe Germany a few billion "Eurowads" .... the debtor calls the shots ?
Greece : Collateraless and Classless ! The "Real" Greeks were classic .... not these rats crawling over the rubble .... of a once great civilization .... kill the rich, kill the beautiful, kill the clever, kill the savers, kill the productive, kill the good families, kill the free .... socialism has always been around .... it's gone by different names .... socialism is the PC way to describe this human cancer !
SEEK HELP NOW!
Disagree... Central Banks brought this plague on the Greek people.
They're printing a trillion,give some moula to the Greeks to extend and pretend.What's a few billion here and there?Keep up the mirage...
Bit late isn't it. But better late than never.