Tuesday, September 9, 2014

Jurgen Stark exposes ECB lawlessness

From today's Open Europe news summary:

Jürgen Stark, former Chief Economist of the ECB warns in an essay in Handelsblatt that “the ECB is on its way to becoming a bad bank” citing the “enormous risks” of its recent monetary policy. He adds that the bank is undergoing a strategic reorganisation which is irreconcilable with the Maastricht Treaty and for which there is “no democratic legitimacy”.

Jurgen Stark was a member of the board of the European Central Bank until he resign in disgust over its policies.  You see, the ECB's board is composed of one member from each member country, making Luxembourg's vote the same as Germany's.  All decisions are by majority vote, so Germany is always outvoted. Here is what Wikipedia says about his resignation:

On 9 September 2011, it was reported that Stark would leave the ECB due to disagreement with the bank's controversial bond-buying programme, according to Reuters,[3] while the ECB officially announced his resignation as being for "personal reasons". Stark's term had been set to expire in May 2014.

Here is a direct quote from the Maastricht Treaty that created the ECB:

1. Overdraft facilities or any other type of credit facility with the ECB or with the 
central banks of the Member States (hereinafter referred to as ‘national central banks’) 
in favour of Community institutions or bodies, central governments, regional, local or 
other public authorities, other bodies governed by public law, or public undertakings of 
Member States shall be prohibited, as shall the purchase directly from them by the ECB
or national central banks of debt instruments.
The real question is why more German politicians, bankers, and economists tolerate this violation of the ECB's mandate. The ECB has no authority to monetize any debt issued by any agency. Germany has no legal obligation to belong to an organization that violates its mandate. It should leave the eurozone forthwith and reinstate the Deutsche Mark.

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