The German revolt against Lagarde


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Christine Lagarde promised them very easy. Letting the euro economy roll until December and then, with the German Social Democrat Olaf Schoz already replacing the embankment Angela Merkel, channeling the new European drift towards more relaxed and permissive places. But it will not be that simple. Critics of the extra-lax monetary policy of the European Central Bank (ECB) are confirmed by the most recent evolution of inflation rates. A cursory reading of the resignation of Jens Weidmann at the head of the German Bundesbank may suggest that the last of the hawks has fallen, but in the face of the internal parish, Weidmann’s message is that the battle for the ECB is lost. Not to make way for a surrender but to rethink the battle that hitherto German academics were fighting for good. Now they want this aspect of runaway inflation to receive greater consideration from the Federal Constitutional Court. A group of businessmen and professors around the economics professor Johann Heinrich von Stein, assisted by the legal representative Markus Kerber, has intensified their constitutional complaint process against the enormous emergency aid to governments by the ECB and on the occasion of the economic paralysis forced by the pandemic. In Karlsruhe, another 50 pages of the brief have already been presented, after a constitutional complaint was filed in March with a very extensive complaint (Az. 2 BvR 420/21). The joint debt issued by the European Commission will not go without resistance.

In March, the complainants mainly claimed that the ECB’s PEPP crisis program, which has a volume of € 1.85 trillion, violated the prohibition on monetary state financing and thus violated Article 123 of the Treaty on the Functioning of the European Union. With the emergency aid program, the ECB is leaving its sphere of competence, they defend before the Constitutional Court, claiming that it is an economic and financial policy measure to stabilize or even rescue the euro zone.

Inflation rates, which have risen steadily since then, provide new arguments. Infection rates also continue to rise in Europe, alongside shortages of supplies, which paralyze industries, and the energy market is under increasing and untamed stress. With all this behind her, Christine Lagarde will have to go out today to give a press conference, after the meeting of the ECB Council in Frankfurt, with the face that nothing is happening here. Let’s see how he manages to contradict that “glaring contradiction between the supposed objective of the PEPP – to achieve an inflation rate of 2% – and the inflation rate of almost 5% that Germany now faces.” “In view of the current inflation, which is woefully persistent in Germany, the PEPP cannot continue for a single day in operation,” cries Kerber: “If it continues, the ECB will fall into a trap. In view of the inflation trend, the The ECB can no longer depend on a stability policy justifying the purchases of PEPP bonds. Instead, it is to be feared that the ECB will only maintain the contested emergency program to artificially maintain the interest rates of the countries with the highest debt in the area. euro below market level. ”In this way, the complainants argue, the ECB is clearly violating the ban on monetary state funding.

The inflation rate considered by the ECB, however, is not that of Germany but that of the euro area as a whole and is interpreted in the medium term. Lagarde will argue that he expects average inflation rates in the euro area of ​​1.7 and 1.5% for next year and the following year, both below 2%, and will present this data as a shell. But European citizens feel the electricity bills and the shortage of products in their pockets, which are reaching scandal prices for those who are willing to pay them. The public does not understand so much about monetary policy objectives as the bills that arrive in the mailbox and Lagarde will convince those who are willing to be convinced, but not the rest. Critic Kerber criticizes these ECB forecasts as “determined by political illusions” and denies the legality of the weighted average measures used for inflation: “price stability must also be guaranteed in all euro areas.” In Spain, energy prices have increased by 80%, according to Oxfors Economics. Experts do not expect Lagarde to raise rates until 2023, but there are reasonable doubts about the possibility that it could remain immobile until then.

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