Speaking at a Bundesbank symposium in Frankfurt yesterday, Bundesbank President Jens Weidmann called for the German Constitutional Court to prove the legitimacy of Mario Draghi's QE program of sovereign bond purchases from the banks. "The German Bundesbank would welcome examination by the Federal Constitutional Court of open legal questions in relation to the prohibition of monetary financing of governments," he said. Weidmann also stressed that it is the task of the central bank "to defend the value of money."
The previous day Draghi had said in Brussels that the ECB is ready for its QE program, combined with a deflationary Brüning program. The ECB "is ready to activate, under the appropriate conditions, what we called Unlimited Monetary Transactions," he said. However, if member countries do not respect the program, the ECB will interrupt the bond-purchasing program.
Draghi also said that it is opportune that the single banking supervisor for the EU will be in place starting next January. It is known that the German government wants to delay that. Weidmann's speech could be the prelude to a formal Bundesbank step at the Constitutional Court, which is already examining the several challenges against the ESM. The arguments used by Weidmann are legalistic: by purchasing government debt, the ECB violates the treaties which forbid central bank financing of government debt. Thus, the ECB could lose its "independence."
A constitutional challenge, if successful, could stop the insane ECB and euro policy, even if the argument of central bank "independence" is crooked. In fact, 1) central banks are not independent but are controlled by private financial interests; 2) even so, at each and every board meeting of the ECB, a member of the EU Commission (the EU executive) participates. Usually it is Olli Rehn, the Currency Commissioner. And often, even Jean-Claude Juncker participates. Now, Juncker is a politician, a head of government (Luxembourg) and the president of the Eurogroup, an entity of the EU Council, which comprises of the Eurozone finance, economic, and budget ministers.
Nota Bene: Draghi's urgency on the Banking Union/Banking Supervisor reflects the disintegration of the Eurozone financial market. De facto, there is no longer any single market. Prof. Marco Mazzucchelli, one of the members of the Liikanen group, explained recently in an interview that the financial markets in the Eurozone have "re-nationalized" themselves. A Banking Union would change that from the top, in a highly dirigistic way.