The major euro zone event of the week starts on Tuesday when Germany’s top court – the Constitutional Court in Karlrsuhe – holds a two-day hearing to study complaints about the ESM euro zone bailout fund and the European Central Bank’s still-unused mechanism to buy euro zone government bonds.
The case against the latter was lodged by more than 35,000 plaintiffs. Feelings clearly run high about this despite the extraordinary calming effect the mere threat of the programme has had on the euro debt crisis. Some in Germany, including the Bundesbank, are worried that the so-called OMT could compromise the ECB’s independence and would be hard to stop once launched.
A verdict won’t be delivered until later in the year but already there is already jockeying for position. Germany’s Spiegel reported that a limit had been set on the amount of bonds the ECB could buy – directly contradicting what Mario Draghi has said. That was swiftly and categorically denied by the ECB, then Executive Board Member Joerg Asmussen warned there would be “significant consequences” if Germany’s constitutional court rules the bond-buying programme was illegal.
Draghi got his retaliation in first last week, saying the OMT had proved probably to be the world’s most successful monetary policy gambit. Given the dramatic fall in euro zone borrowing costs, he has a claim. French President Francois Hollande’s weekend assertion that the euro crisis is over looks a little more shaky.
Asmussen will represent the ECB in Karslruhe while his friend Jens Weidmann will put the Bundesbank case. Weidmann is speaking today as are a clutch of other ECB policymakers.