Home > Uncategorized > Mario Draghi Assault On Democracy – Business Insider

Mario Draghi Assault On Democracy – Business Insider

September 11, 2012 Leave a comment Go to comments

CNBC’s Silvia Wadhwa is one of the best, most veteran ECB reporters in the world, and she has a must-read takedown of Draghi on the subject of his subversion of democracy.

Let´s just consult the ECB mandate. Under the heading “Independence” you find the following sentence: “Neither the ECB nor the national central banks (NCBs), nor any member of their decision-making bodies, are allowed to seek or take instructions from EU institutions or bodies, from any government of an EU Member State or from any other body”.

“So what?” you say? With its OMT program the ECB is neither seeking nor giving instructions. Ahhh, not so fast. With its OMTs the ECB is setting politicial pre-conditions (the often-used buzz word “conditionality”) for executing monetary policy in order to safeguard price stability and the functioning of monetary transmission processes as laid down in its mandate. In other words, the ECB is saying, we will only do our job if certain political conditions are met.

It’s really that simple: either bond purchases of euro countries where yields are blowing up in a fashion that threaten the functioning of the markets are within the ECB mandate. Then the ECB should embark upon them whenever it sees fit. Or they are not within the mandate; then it should jolly well stay away from them, because it would be illegal. Period. End of argument.

But to say “we are acting within our mandate”; but we shall only do so, if you (the country in question) deliver on certain political conditions; then — I am sorry — the ECB is taking on a role it was never designed for and that is certainly outside its mandate. The ECB was designed for supporting “the general economic policies in the Community with a view to contributing to the achievement of the objectives of the Community” (in as far as it doesn’t´t infringe upon the primary mandate of safeguarding price stability). Supporting policy, not setting conditions for it or setting an agenda for which economic of financial policies a given country embarks upon.

She goes on to note that she has no problems at all with bond buying, which she thinks is clearly within the ECB’s mandate.

In the FT, Gideon Rachman hits on the same theme:

The European Central Bank has fired its magic bullet. By promising “unlimited” purchases of sovereign bonds, Mario Draghi, the ECB’s president, may have kept his pledge to do “whatever it takes” to save the euro. But in rescuing the currency, Mr Draghi’s magic bullet has badly wounded something even more important – democracy in Europe.

As a result of the ECB’s actions, voters from Germany to Spain will increasingly find that crucial decisions about national economic policy can no longer be changed at the ballot box. In Germany, in particular, there is a growing realisation that the ECB, an unelected body that prides itself on its independence from government, has just taken a decision that has profound implications for German taxpayers – but one that they cannot challenge or change.

via Mario Draghi Assault On Democracy – Business Insider.

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