Last year, a number of plaintiffs, includes the Bundesbank, went to the German Supreme Court in an attempt to stop the ECB from implementing its announced Outright Monetary Transactions (aka OMT) program, where the ECB will buy ‘unlimited’ amounts of member states’ government debt. The plaintiffs argued that the OMT program violated agreed upon treaties and violated the German Constitution. The German Supreme Court’s ruling was expected last year November, but was delayed until last week.
The German Supreme Court ruled in favor of the plaintiffs, saying the ECB’s program goes beyond its mandate and is in violation of the law, BUT before making its final ruling, kicked the case over to the European Court of Justice, asking them to make a ruling. After hearing from the ECJ, which may take from 12-18 months, the German Supreme Court would then make its final ruling.
I am not a legal expert, so the many legal ramifications and precedents that this may trigger will have to be further explored after the legal pundits have their go at it (which may take time for us to gain access to). However, our own expectations and suspicions were vindicated by the gist of the Court’s ruling.
The financial markets and everyone else are all assuming the European Court of Justice will rule in favor of the ECB and give it a green light for its OMT program — despite the fact that it should be obvious to anyone who can read, that the program in question does violate the relevant laws and treaties. As the ECJ ruling will take more than a year to come out (and maybe more than 2 years should they decide to make a similar finding to the German court), we will revisit this important matter only sporadically given the long wait for its final resolution.
Why do we care about this issue? If the German Supreme Court decides to rule that the OMT violates the German Constitution, then there is the risk that Germany will not fund the ECB should it implement the OMT program — rending the ECB impotent. Should this occur, then when the Euro government debt crisis re-ignites, the ECB will not have any tools to put out the fires. In another scenario, should the German court rule that the OMT violates the German Constitution, and Germany is still forced to support that program because the European Court of Justice overrules it, then this may be enough to trigger a voter rebellion in German. Bottom line — this issue still has the potential to trigger a Euro-crisis in Germany. We will have to wait and see how things develop — but it might prove to be a long wait (and an even longer wait for the news to finally come out).
This site has argued that a breakup of the European Union before the final ascension of the Beast is possible and a hoped for event as that will free some countries from the direct control of the Anti-Christ. We had held out hope the German Supreme Court would be a catalyst for that breakup. It looks like we will have to wait another 12-18 months to see how this drama unfolds.