5.1 Introduction to the reform process

5.1 Introduction to the reform process

Since the monetary financing of governments is prohibited by the EU Treaty, the ECB cannot deviate too much from the respective country quotas in its purchasing programmes. The deviation is already considerable today:

Chart 36: Deviation from the ECB's capital key in percentage

It is already clear today that the PSPP (see Chart 5) favours certain countries. Based on the data from February 2019, the programme deviates significantly from the capital key, which would have to be allocated to the individual countries. Italy's deviation is around 9%, Spain's around 8% and France's 4%. Germany, on the other hand, is down by almost 2%.

Chart 37: Deviation from the ECB's capital key in billions of euros

The deviation is also very clear in absolute figures. Italy, Spain and France benefit from this purchasing programme. The claim by the ECJ and the ECB, that there is no prohibited monetary financing of governments here is very flimsy.

Only when the tide goes out do you discover who's been swimming naked.
The American investor Warren Buffert

Even today, the ECB is no longer able to buy up sufficient promissory notes from some countries to achieve the targeted country ratios. Since the capital ratios of the ECB are measured by the economic performance of the individual countries and as the southern European countries fall further behind, their "claim" to government bond purchases in the ongoing PSPP is also declining. The ECB's purchase programme therefore has a very thin legal foundation. An expansion of the APP programme would quickly lead to a situation in which even benevolent courts could no longer avoid accusations of the law being breached. Without new transfers, however, the system would quickly end. The renowned investor Warren Buffet puts it this way: "Only when the tide goes out do you discover who's been swimming naked." The water, of course, stands for the flood of money.

The ECB is therefore dependent on the policy to take over the transfers to the south and to relieve the ECB of its burden. With the "5-Presidents' Report" published on 22 June 2015, the Centrists attempted to initiate a comprehensive initiative to reform the EU.


List of references for the used photo and charts: