Opinion: ECB becomes Europe′s politburo | Europe| News and current affairs from around the continent | DW | 07.09.2012
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Opinion: ECB becomes Europe's politburo

Is the ECB overstepping its mandate with its new bond-buying program, or is that still in line? It definitely is a turning point in Europe because the monetary watchdog now does politics, says DW's Henrik Böhme.

Who do I call when I want to speak to Europe? It was former US Secretary-of-State Henry Kissinger who once asked this question. Today, one would have to reply: Call Frankfurt, call the European Central Bank (ECB). Since Thursday, it has become clear that is the place where European politics are being decided - and not Brussels.

With its decision to buy bonds of fiscally-challenged countries in the eurozone, the ECB has parted with its original mandate and principle of solely maintaining price stability. That's over now. The monetary watchdog is bucking tradition and breaking existing law. The ECB, in doing so, has become a public lender.

Only the German representative on the ECB's governing council, Bundesbank President Jens Weidmann, voted against the decision. Even countries that used to be on his side until now - Finland, Luxembourg and the Netherlands - refused to follow the German vote. Even worse: German Chancellor Angela Merkel, who used to back Weidmann, has now said that the ECB is acting within its mandate.

But how can the ECB still claim to be the most independent central bank in the world? That's namely what it is supposed to be, according to its own statutes and the European constitution. But that is something the ECB can no longer be because Thursday's decision to purchase government bonds - only when the respective country has sought assistance from the rescue fund - means that the central bank has moved into politics.

DW's Henrik Böhme (photo: DW)

DW's Henrik Böhme

And how should the new program be better than the first program of this kind? The ECB has already bought bonds from its struggling states in the past two years. With a financial limit indeed, but still with the hope that politicians of the crisis states would now start to tackle necessary reforms. But this has been done in a half-hearted way. Spain and Italy still had to pay high interest rates when taking on new debt. But high interest on market rates for government bonds is nothing but the price for unfinished reforms.

When the ECB now so drastically interferes with the government bond market - because it is distorted, as ECB head Mario Draghi put it - it might lead perhaps to stress reduction for a short period of time, but Europe will suffer from this gigantic burden in the long run.

Basically it doesn't even matter anymore what Germany's Constitutional Court will decide on Wednesday regarding the eurozone bailout scheme, the European Stability Mechanism (ESM). The court will announce whether the ESM is in line with German Basic Law. Even if the court says no, it isn't; it won't stop the ECB going through with its bond-purchasing program.

Chancellor Merkel is going to be grateful to Draghi. She now doesn't have to ask the German parliament's permission if the bailout fund needs to be expanded once again. The decision has alreqady been made by - right - the ECB. It has started the printing press for more euros and only Draghi knows where the kill switch is.

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