The European Central Bank (ECB) prepared to live without the Bundesbank — the Central Bank of Germany and its largest shareholder, writes Reuters. In the long term this may jeopardize the existence of the Eurozone.
The conflict broke out because of the reluctance of Germany to participate in the pan-European quantitative easing program (QE) to 750 billion euros, the ECB is prepared. Under it, national regulators of the Eurozone countries will have to buy commercial banks ‘ assets in the form of government bonds of member countries and bonds of commercial companies.
The program has two objectives: to fill the balance of commercial banks acting as sellers, the liquidity that can be used to issue required the victim to the economy loans, and lower yields buy securities. The latter will allow you to place new bonds with a reduced rate.
Initially, the Bundesbank agreed to participate in the program, but then saw in her a number of violations. In the end the question was referred to the constitutional court of Germany, and in early may, he confirmed the presence of a base in order to consider the impending QE program is illegal.
In particular, the court pointed out that the program can be viewed as “monetary financing” — the infusion of funds into the economy due to the issue. This measure implies inflation and is therefore forbidden in the Eurozone and in the European Union. Previously it was thought that QE is not direct “monetary financing”, because it uses intermediaries such as commercial banks.
The court also ruled that buying junk bonds “of companies-zombie” will allow them to stay afloat and will have a negative impact on the balance sheets of commercial banks and Central banks, and thus ultimately harm investors. The same will happen when buying the debt of countries with low ratings. The court gave the ECB three months on the rationale and security of QE, until then banning the Bundesbank to participate in it.
After that, the head of the ECB, Christine Lagarde, said that will find a way to force Germany to participate in the General salvation of the European economy. Now, however, as pointed out by the source Agency, in this case there is doubt. The ECB is preparing for a worst case scenario, which assumes full refusal of the Bundesbank from participating in quantitative easing.
It is not excluded that the ECB will deploy a full-scale legal action against the Bundesbank and will submit a claim to the European court as the highest court in the EU, whose decisions cannot be appealed. This will be an unprecedented step since the introduction of the Euro as a single currency, and could theoretically jeopardize its very existence.
Video, photo All from Russia.