Following closely on the heels of our recent (now must read) discussion [10] of the potential illegality of Draghi's OMT, Reuters [11] is reporting the somewhat stunning news that the ECB and Bundesbank are getting lawyers to check the legality of the new bond-buying program. Germany's Bild newspaper - via the now ubiquitous unnamed sources - said in-house lawyers were checking both what proportions the program would have to take on and how long it would have to last for it to breach EU treaties (that specifically ban direct financing of state deficits).
While Draghi - full of bravado - likely said whatever he felt was necessary at the time to stop the inversion in the Spanish yield curve, it is becoming clearer that, as usual, the premature euphoria (in the complacent belief that central banks can solve every problem with a wave of the magic CTRL-P wand) was misplaced.
Bild goes on to note that this matter could be referred to the European Court of Justice - and the ECB/Buba were preparing for such an event. Of course, since every other rumor in recent months, most of which have originated in credible media, has proven to be a lie, it is likely this is also merely leaked disinformation to push the German case, i.e. anti-Europe.
Via Reuters [11]:
BERLIN, Sept 25 (Reuters) - The European Central Bank and Germany's Bundesbank central bank are getting lawyers to check the legality of the ECB's new bond-buying programme, a German newspaper said on Tuesday.
German tabloid Bild, which did not name its sources, said ECB and Bundesbank in-house lawyers were checking both what proportions the programme would have to take on and how long it would have to last for it to breach EU treaties.
The newspaper said this meant there was a possibility that the issue could soon be referred to the European Court of Justice and added that the ECB and Bundesbank wanted to legally "arm" themselves for this scenario.
Bild said the background to this was controversy over the issue of whether the ECB bond-buying programme violates the ban in EU treaties of direct financing of state deficits. The ECB and the Bundesbank were not immediately available for comment.
ECB President Mario Draghi announced earlier this month that the central bank stood ready to buy unlimited amounts of bonds issued by euro zone member states, provided they put in a formal request for aid and fulfilled strict domestic policy conditions.
Jens Weidmann, head of the Bundesbank, was the sole dissenting voice in the ECB's decision.The plan is designed to lower the borrowing costs of euro zone states such as Spain and Italy by buying their bonds, but it has stirred anxiety in Germany where some people fear the ECB is venturing beyond its mandate and potentially exposing taxpayers to billions of euros in risky debt.Draghi has said the plan is strictly within the ECB's mandate.