6.1 Southern European policy gaining ground

6.1 Southern European policy gaining ground

Ten years ago, the euro crisis broke out. To bring it under control, the governments of the EU  have bent the European treaties beyond recognition. The ban on the monetary financing of governments enshrined in the treaties has been ignored and the European Central Bank is launching huge purchasing programmes. Today, the ECB holds a stock of government bonds of the order of around 2,000 billion euros. This breach of the law was politically intended and is politically covered. There was hardly any political criticism of the Mario Draghi's leadership of the ECB, and even the ECJ closes its eyes to it. In its ruling of 11 December 2018, it declared the ECB's purchase programmes admissible. From the point of view of the politicians acting at the time, this breach of the law was necessary to "save" the euro. However, with it, the original concept of the euro, i.e. the export of successful economic traditions, such as the liability of each Member State for its own debts, its direct responsibility and the strict adherence to monetary policy rules, was finally buried. The euro has proved to be a political construct, a short-term political requirement.

The European Court of Justice, which is supposed to serve the "ever closer union" enshrined in the Treaties and is regarded as the engine of European integration, is also closing its eyes. In its ruling of 11 December 2018, the European Court of Justice declared the ECB's purchase programmes to be completely unobjectionable.

Not all Germans believe in God, but they all believe in the Bundesbank.
Jaques Delors, 1992

Originally, the common currency was also to be used to export successful German economic traditions, such as the liability of each Member State for its own debts, direct responsibility and the strict adherence to monetary policy rules. This became history with Draghi's famous statement. In contrast to Germany, where the Bundesbank, with the great support of its citizens, was always independent and beyond the reach of politicians, the ECB is now politically led and serves short-term political requirements.

International treaties with independent nation States rely on the good will of these States to abide by the agreements. Over time, it has become clear that the economic policy traditions of the southern countries have prevailed over the idea of taking over the German positions. The idea of the "pacta sunt servanda", according to which contracting parties must fulfil their obligations, is subordinated to the French or southern European understanding of democracy.

According to this understanding, obligations are only valid until the voters decide on new politicians and new ideas. The personal commitment of political leaders to rules is not compatible with democracy for southern Europeans. On the contrary, they want every new generation of politicians to have as much room for manoeuvre as possible and also expect them not only to be able to question treaties concluded by the politicians who used to be in power but that they should do so.

This development can be observed everywhere in the EU in matters of monetary and also economic policy. Nowadays, the trend is to do exactly the opposite of what was the original intention. The southern European countries in the ECB and in the European Parliament are forcing a shift towards a southern European political style, debt and inflation. One might think that the Banque de France or the Banca d'Italia were role models for the ECB.

But this development also means that new ideas coming from southern Europe and Brussels fail. Once again, people want to exchange reforms for money. Southern Europeans are supposed to commit themselves to reforms and a stable budgetary policy and in return receive northern European transfers. But what are such commitments worth if their validity ends with the next election? Few northern Europeans are prepared to engage in the next session of horse-trading. The German concept of a politically independent central bank has been irrevocably damaged by those at the helm of this very ECB. But there can be no credibility if monetary policy is subordinated to the demands of day-to-day politics.


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