Bulletin n. 2/2015
September 2015
CONTENTS
  • Section A) The theory and practise of the federal states and multi-level systems of government
  • Section B) Global governance and international organizations
  • Section C) Regional integration processes
  • Section D) Federalism as a political idea
    • Michael A. Wilkinson
    The Euro Is Irreversible! … Or is it?: On OMT, Austerity and the Threat of “Grexit”
    in German Law Journal , Vol. 16, no. 4 ,  2015 ,  1049-1072
    The promise of the ECB to act effectively as the Eurozone’s ‘lender of last resort’ was widely praised as a central plank in a broader strategy to protect the Euro and avoid financial meltdown in its Member States. “Never has so much effect been gained by doing so little. Words alone, it seemed, calmed the markets . . . .” The OMT program appeared as a “watershed” in the Eurozone crisis, “one of the most effective announcements any central bank has ever made.” The reason for its success was straightforward: Financial investors would be encouraged to buy the bonds of distressed member states with the knowledge that they could later sell them on to the ECB. The prospect that the ECB would move into sovereign debt markets “with the full weight of its balance sheet” was an offensive that “no market participant could hold a short position against.” That is what Draghi meant when he said “the euro is irreversible.” There was, however, a snag. The ECB had no authority to do it. Restricted by the rules set up by the Treaty of Maastricht, the ECB’s objective is to ensure price stability alone—to avoid inflation, and in order to promote fiscal discipline it is prohibited from monetary financing of national budgets (Article 123 TFEU). OMT was not only ultra vires as a matter of European law; it was also a structural transgression of competence in breach of German Basic Law. This, at least, was the opinion of the German Federal Constitutional Court. After many decades of shadow-boxing, the German Court, in its first ever reference to the ECJ, made plain its objections to OMT but gave the ECJ the opportunity to do its work for it.
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