'..the ECB is going far beyond what Bagehot asked the central bank to do in times of panic..'
- Otmar Issing (Context:
'..present violation of law..' - Otmar Issing)
'Issing argues that, if countries had followed the EU fiscal rules and built up fiscal surpluses in good times, they would not be in the position to needed a bail-out now. It is not the role of the ECB to prevent a collapse of national public finances. And Art 125 TFEU, the no-bail out clause, is still there. It says the union must not take over the liabilities of member states, and that member states must not take over one another's liabilities. Even as advocates of a mutualised eurobond ourselves, we must acknowledge that there is no firm legal basis for it under EU law.'We have been waiting for the German professors to wag their fingers, or to threaten legal action against the ECB or national governments. But so far it has been mostly quiet on that front. This morning, however, we saw an article by Otmar Issing in FAZ, in which he argues that emergency was no excuse for law-breaking. He accuses the ECB of monetary financing and says that a mutualised eurobond is illegal unless formally accepted by national parliaments. As an addendum from us: in Germany the hurdle may be much higher. The German constitutional court has ruled that a political and fiscal union requires that Germans holds a referendum to abolish national sovereignty and formally transfer sovereignty to the EU. They obviously didn’t put up such a high hurdle in the hopes that somebody would jump over it.
Issing’s comment is likely to matter not only only because of his former role at the ECB. He carries enormous weight among German conservatives.
Issing argues that, if countries had followed the EU fiscal rules and built up fiscal surpluses in good times, they would not be in the position to needed a bail-out now. It is not the role of the ECB to prevent a collapse of national public finances. And Art 125 TFEU, the no-bail out clause, is still there. It says the union must not take over the liabilities of member states, and that member states must not take over one another's liabilities. Even as advocates of a mutualised eurobond ourselves, we must acknowledge that there is no firm legal basis for it under EU law.
Issing’s article is likely the beginning of a legal discussion about the future course of policy. We saw it during the euro crisis. The legal fall-out from that period is still not over. The German constitutional court has yet to rule on the legality of QE. We expect the next phase of legal arguments to arise before the old one has come to an end.
- Eurointelligence,
Return of the German Professors, March 24, 2020
'..policy which relies on a forecast (model) based on a real economy only without a financial sector – without taking into account money and Credit in a sensible way - is not anymore state of the art. If you have just such a narrow aspect - in contrast to our experience, again, that price stability is not enough – it’s not enough. So, monetary policy has to take into account the development of money and Credit – by that I mean a very broad approach considering all aspects of financial stability..'
- Otmar Issing, February 27, 2014 (Context:
'..the development of money and Credit..')
Context (Global Credit) - '..More than 11 years ago Dr. Issing recognized the key issue for 2015..'(Bloomberg) - 'EU judges ‘overstepped’ their powers when backing ECB in 2018'(Banking Reform - English/Dutch) '..a truly stable financial and monetary system for the twenty-first century..'(Reduce the public (global) debt) - 'Germany .. Its finance ministers, backed by voters, insisted that balanced budgets and low debt were prudent policies storing up ammunition for a crisis.'Spain Seeks Another Bailout as Deficit Skyrockets, May 1, 2020
'..economic mainstream..' - '..a “monster” or “legal aberration,”..'