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European Central Bank Declares War on German Constitutional Court

June 5, 2020 (EIRNS)—In what is an open declaration of war against the German Constitutional Court, and against national sovereignty more generally, the European Central Bank (ECB) decided yesterday to increase the volume of the Pan-European Personal Pension Product (PEPP), its new asset purchase program, by €600 billion, from €750 billion to €1.350 trillion, and to extend it to at least June 2021. The principal of those assets will be reinvested until at least the end of 2022. Furthermore, the ECB decided to keep making purchases of €20 billion a month under the old APP program until the end of the year at least. That principal too, will be reinvested for an extended period of time after interest rates will be raised.

The ECB kept the interest rate unchanged.

This is the ECB response to the Karlsruhe German Constitutional Court ruling which had ruled the PEPP “unproportional” in a groundbreaking sovereign decision on May 5. Going further, ECB President Christine Lagarde made it clear that the current PEPP program will be even more unproportional.

Answering journalists’ questions at the press conference after the ECB board meeting, Lagarde explained that the PEPP will be totally flexible, one aspect of it being “jurisdiction”: “As you know, the ECB’s capital key guides the benchmark for our purchases of public sector securities. We assessed that there was a strong and urgent need to purchase with deviation from the benchmark guidance, as we faced, and still continue to face, risks of fragmentation that threaten the smooth transmission of our monetary policy across the entire euro area. So, we have used, and we will continue to use, the PEPP to counter such risks of fragmentation. I would like to reassure you that the guiding principle of flexibility will be maintained throughout the lifetime of the PEPP.”

(The violation of capital key provisions by the ECB actions was a key point in the Karlsruhe ruling. However, to cover its rear, the ECB has favored Germany, together with Italy and Spain, in deviating from the capital key in April/May. Purchases of French sovereign bonds have been below France’s capital key.)

Answering several direct questions on the Karlsruhe ruling, Lagarde made it clear that the ECB considers EU law primary over Germany’s or any other nation’s constitutional law: “I just want to remind you that the ECB is subject to the jurisdiction of the Court of Justice of the European Union. The PEPP has been judged by the Court of Justice of the European Union as in line with our policy mandate. We have indeed taken note of the judgment, which is directed at the German government and at the German Parliament, and we are confident that a good solution will be found. A good solution that will not compromise the ECB’s independence, will not compromise the primacy of the European Union law or the ruling of the European Court of Justice.”

(The ECB balance sheet was €5.596 trillion as of May 29; €3 trillion are assets purchased under various programs. With linear projections, by June 2021 the ECB balance sheet will be €6.6 trillions but the figure will be higher because the beast will require more meat.)

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