Draghi's power ends in Karlsruhe

In an interview with Il Manifesto, Agustín José Menéndez discusses the consequences of the German Constitutional Court's February ruling on the European Central Bank's OMT mechanism.

Mario Draghi, head of the European Central Bank (photo: ECB via Flickr)

The interview with Agustín José Menéndez is published in the weekly section on European economy (Sbilanciamo L'Europa) of Italian newspaper Il Manifesto.

The European Central Bank's controversial decision on Outright Monetary Transactions (OMT) opens for unlimited ECB purchase of government bonds. This program was announced by Mario Draghi in his famous 'whatever it takes' speech in July 2012. In February 2014, the German Constitutional Court (GCC) found OMT to be incompatible not only with the German Constitution, but also with EU treaties, on the basis that the ECB cannot make fiscal policy.

In the interview, Menéndez claims that the political importance of the GCC sentence is enormous. 'In reality, the German judges have told the European judges how EU law is to be correctly interpreted, implicitly accusing the latter of not knowing how to do it', he explains. In the view of Karlsruhe, Draghi's 'whatever it takes' does not follow the rules. 'What the GCC does not accept is that Draghi makes fiscal policy exempt of any democratic control, hoping that the governments will react so that the ECB will not have to activate the OMT mechanism.'

'The court completely reinterpreted its own jurisprudence, assuming that the fundamental value of the German Constitution, in European matters, is monetary stability. But nobody really knows what monetary stability means: it is a problematic concept, with no objective content', Menéndez says.

He further refers to the internal discussions among the German judges, highlighting the controversial issues at hand. 'One of the judges did not want the GCC to make a sentence that could put the whole monetary union at risk.'

Read the full interview here (pdf)

'Il potere di Draghi si ferma a Karlsruhe', Il Manifesto, 5 December 2014, pp. 2-3.

By Marit Eldholm (translations from Italian)
Published Dec. 12, 2014 1:26 PM - Last modified Dec. 12, 2014 1:26 PM