Vorabentscheidungsverfahren

“Advance decision process.”

For the first time ever, Germany’s supreme court, the Bundesverfassungsgericht in Karlsruhe, sent a case on to the European Union’s supreme court, the European Court of Justice in Luxembourg. It was for a “decision in advance” on a lawsuit brought in Germany by members of the C.S.U. and Leftists political parties together with other groups, about whether the policy of the European Central Bank announced by Mario Draghi (Goldman Sachs) of buying theoretically unlimited amounts of debt from Member States would be exceeding the Bank’s current brief by redistributing money to countries that hadn’t cleaned up their governments yet. It’s also feared if left unlimited the policy might put the E.C.B. in the hazardous position of becoming a “bad bank” on behalf of the banks in the troubled countries whose debt it was buying.

Süddeutsche.de reported that this sort of debt purchasing, which a government must promise to cut costs and carry out structural reforms in order to receive, has never occurred, but the announcement that it was possible calmed the markets in 2012. Spiegel.de made it sound more like the structural reforms and cost cutting were linked to aid from the Euro-Rettungsschirm, the “euro rescue umbrella” bailout programs, but repeated that the E.C.B. has never carried out any of these so-called Outright Monetary Transactions.

After the Bundesverfassungsgericht receives the decision of the European Court of Justice on these questions, said the Spiegel.de article, it will then decide its own case. And here are four ways the Bundesverfassungsgericht said in its 52-page submission that the European Court of Justice might deal with the Bundesverfassungsgericht’s concerns:

  • “The bond purchases should not undermine the policies of the bailout funds [Rettungsschirme] which link loans to clear conditions such as savings programs and reform programs.”
  • “The E.C.B. would have to rule out the possibility of a debt haircut [Schuldenschnitt] for the purchased bonds, because in the end a haircut would mean financing of the country.”
  • “Individual Member States’ bonds may not be bought in unlimited amounts.”
  • “The E.C.B. should influence so-called pricing [Preisbildung] as little as possible by buying bonds shortly after their emission by the States.” Apparently the E.C.B. previously agreed to limit O.M.T.’s in this way to some degree by agreeing to not buy bonds immediately after emission and to follow purchasing time frames that will be defined in a guideline that will not be made public.

(Fore OB ent SHY doongs fair FAR en.)

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