German court disarms Draghi's 'big bazooka'
Thursday, February 13, 2014 at 10:43PM
Silver Prices

Mario Draghi

Germany constitutional court ruling may trigger new turbulence for the eurozone

Mario Draghi’s pledge that the European Central Bank would do “whatever it takes” to save the euro is in big trouble after Germany's constitutional court today gave “important reasons” why it was illegal.

The development may well trigger new turbulence for the eurozone. As eurozone governments have balked at banking and fiscal union, the ECB's Outright Monetary Transactions (OMT) programme has become the most important, totemic factor in easing the sovereign debt crisis.

The "big bazooka" of unlimited sovereign bond purchases to defend the European Union's single currency has been seen as the ultimate weapon and it may now be unusable after the legal mangling that Germany’sBundesverfassungsgericht has given it.

Officials in Brussles and Frankfurt are playing down the Karlsruhe’s court’s statement that it was “inclined” to find the ECB's OMT programme illegal because the German judges have taken a historic decision to refer key legal issues to the EU courts.

They should not be too complacent.

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