ECJ signals approval for ECB plans
The European Central Bank may purchase government bonds under certain conditions, according to an opinion published Wednesday by the attorney general of the ECJ. The ruling backs ECB chief Mario Draghi's plans for financially supporting the crisis-ridden euro states, some commentators write in praise. Others fear this signal will undermine any will to reform.
Crisis cries out for unconventional measures
Although the opinion of the ECB advocate general does not give free reign to the European Central Bank and its president Mario Draghi, it is a major success, the left-liberal daily Berliner Zeitung writes: "Now the ECB just has to do what other central banks around the world have done and what the German Bundesbank did in the days of the German mark. It seems the German plaintiffs will once again fail in their attempt to put the ECB in shackles. ... Certainly, Draghi is taking his expansive monetary policy very far and resorting to unconventional measures. But with a chronic crisis, record unemployment and a growing rift between the member states' economies and the financial markets, can one say that the situation in the Eurozone is normal? Draghi's medicine will certainly have side effects. But saying no would be to leave the critically ill patient without any medication whatsoever."
ECJ ruling an important turning point
The ruling paves the way for the ECB to implement new, unconventional measures, the liberal business daily Il Sole 24 Ore comments joyously: "The ECJ opinion, coupled with the data on deflation in Europe, make any legal or economic objections to the use of unconventional monetary policy in Europe redundant. Even the so-called hawks should be in favour of a policy of quantitative easing - in the interest of Europe and the individual states, including Germany. ... Because if the danger of deflation increases, the German hawk also has reason to be worried: a deflationary phase drives up real wages. The consequences of that are virtually unpredictable and by no means positive for competitiveness and growth. The question now is no longer whether quantitative easing is necessary but which precise form it should take."
Counter-productive for Eurozone reform
The last obstacle to large-scale ECB bond buying has fallen with the opinion of the ECJ's attorney general, the liberal conservative daily Neue Zürcher Zeitung believes, but it worries "that purchases of government bonds (or even the announcement of such a move) could lead to a reduction in the risk premiums. ... The result would be that states can incur debt at a lower cost, which will do little to foster willingness to reform among the respective governments. And indeed, whether it is the task of a currency authority to selectively lower the financing costs of certain states and in so doing practically make them immune to sanctions by the free capital market is questionable, to say the least. The German Constitutional Court is even more critical on this point, saying that it is irritating if a central bank is allowed to pursue a policy that discriminates among different members of the monetary union through selective purchases of government bonds."