While the rest of Europe was still debating fiscal solutions to the debt crisis, Mario Draghi reminded us that the answer may well be monetary. By signalling the possibility of strong ECB intervention in bond markets, the ECB president did not only calm the markets temporarily; he also revealed where the EU is heading.
It is an utterly absurd situation. Bailing out other countries (and other countries’ banks), pooling Europe’s sovereign debt or issuing Eurobonds may be incompatible with the German constitution. They may well violate EU treaty law. They lack any meaningful democratic legitimacy. They are certainly unpopular in those countries most likely to foot the bill.
In summary, the measures should be impossible to implement.
But disguised as monetary policy these quintessentially fiscal arrangements do not only become possible, they almost look legal. Simply claim that the monetary transmission mechanism is broken, and apparently there is a justification to save the whole of Europe from bankruptcy.
Read more: Draghi’s threat to Europe’s middle class | Oliver Marc Hartwich | Commentary | Business Spectator
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