A way for Europe {http://bit.ly/1wAYqI3}
The situation in the euro-zone is very bad. Italy exceeds the still valid sixty-percent limit for the debt ratio by more than a trillion euros in France around about 660 billion euros. But the governments of these two most indebted countries in terms of volume refuse to undergo a rigorous austerity, and the citizens are opposed to reforms that could change anything about stagnation. Also in European politics is no solution in sight.
Inflation is also not the debtors to help. Is stably held the position since 2012 by the ECB, which until now gives the impression that she wants to confront doubts about the solvency of individual states and can boldly. But the legal uncertainty about the future of this policy raises doubts.
In this seemingly hopeless situation, one wonders why the risk premia in the euro zone have not been cut to length increases again. The usual answer to this question is not reassuring: Some market participants appear to be relying on a broad quantitative easing (QE) - that would be the proportional purchase of government bonds from all countries of the euro zone - to be quite safe replacement for controversial selective purchases of government bonds (OMT) , QE, it is claimed, is part of the common monetary policy, as well as in Japan or the United States.
Unauthorised public finance?
As a substitute for the OMT program QE would not convince. From a purely technical stieße a bond purchase, was based on the ECB capital share of the member countries, limits if the scarce amount of the investment-grade bonds puts the purchases of bonds with low credit limits.
When a purchase is proportional to the amount of outstanding debt, the limits were sometimes significantly higher. But then countries could unsound fiscal policies continue under the protection of a long-term and large-scale program. In view of the current political resistance to consolidation the suspicion could an unlawful State funding for such a program. The next argument before the Federal Constitutional Court would be programmed - open-ended.
In conjunction with the new supervisory tasks of the ECB, a QE program act problematic. It would be about desirable that the ECB orders in its role as overseer to reduce the concentration of national government bonds from banks. This would reduce the losses of these banks when these plants were losing by government debt cuts in value.
Threatens lawsuit before the Constitutional
Would get the banks to sell too little time, but it would probably mean excess bonds sell at a loss or insure. Would the ECB at the same time as the central bank as part of a QE particularly those government bonds, would be tantamount to prescribed risk-taking of banks by the ECB same. The "firewall" between banking supervision and monetary policy would then act like a rather tight-sized fig leaf.
Also the ABS program of the ECB raises legal questions: How is it - without a political role of the ECB admit - to justify that securitized private loans from Greece and Cyprus are acquired with different terms than those from other countries?
A fairly safe solution to the euro crisis can not be tolerated in a permanent political overstretching of the mandate of the ECB, via the permanent threat hovers as an action before the Federal Constitutional Court.
Time is running out
Are there alternatives? A resolution of the currency area would provide important economic and legal uncertainty on how to deal with conversion losses with them. But uncertainty about the allocation of losses is the breeding ground of crises. That's why the permanent unity of the European currency area is so important.
The best way out would continue in the fact that Europe agrees on national reforms in exchange for financial freedom. If this does not happen, you have to make friends with another idea: A haircut in Italy could relieve the euro zone as a whole. The time for a better solution is running out.