Whereas in the last few years the US, UK and Japan central banks have been busy flushing the market with money, things have not developed quite the same way in the Eurozone, as the European Central Bank (ECB) is still struggling to define its own role.
Mario Draghi at the Global Investment Conference in London on July the 26th 2012 famously declared: "Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough" a speech that according to most of the observers marked the turning point in the Euro-crisis.
The "whatever it takes" was supposed to translate into a new programme called "Outright Monetary Transactions (OMT)" where the ECB, in some stringent circumstances, could buy bonds emitted by Eurozone countries.
However, the ECB move never materialise, either because it was not necessary, as the simple announcement of its possibility calmed down the markets, or because Germany's central bank, the Bundesbank, has challenged it in the country's constitutional court in Karlsruhe as a breach of the EU treaties and a violation of economic sovereignty.
The ruling of the German Constitutional Court was announced on February the 7th 2014 and its interpretation was not unanimous. As it referred the case to the European Court of Justice, most observers considered that the highest German Court was recognising the European Court of Justice (ECJ) as the competent body to make decisions on this issue. Since the ECJ is unlikely to question the power of the ECB, most of the public opinion considered the ruling as a green light to the ECB policy.
Other observers, however, gave more importance to the fact the judges announced they were "inclined" to regard the OMT decision as illegal, and that they did not commit themselves to follow ECJ opinion on their final ruling, that might occur only in 2015.
The official line of the ECB is that it is fighting against speculations of a break-up of the euro zone, and this should be considered as something different as acting as lender of last resort, an explanation that only confirms how muddled the whole debate is.
Whoever is acquainted with the normal European institutional life will see this debate as quite in line with its traditions of half-baked compromises that time and circumstance help to clarify.
The Euro construction has been elusive in many regards, one of them being the role of the European Central Bank as a central bank acting like others, and this ruling and ensuing debates seem to confirm things will continue that way.
At the Euro-reform 2014 initiative, we think this to be a big mistake that may provoke enormous costs. Time is running against not in favour of the European construction. Europe is not only lagging behind its partners, it is eroding the trust of its own citizens, jeopardising the chances of economic recovery and leaving Europe unprotected in front of unexpected circumstances.
Procrastination is not an option. Only a bold European minded leadership can be the answer to this state of affairs. We have to come back to the drawing board of our monetary construction. The sooner the better.