For anyone with a sense of history, the sight of the German representative on the ECB being isolated and outvoted should be chilling, writes Rachman in his FT column.
In rescuing the currency, Mr Draghi’s magic bullet has badly wounded something even more important – democracy in Europe.
As a result of the ECB’s actions, voters from Germany to Spain will increasingly find that crucial decisions about national economic policy can no longer be changed at the ballot box. In Germany, in particular, there is a growing realisation that the ECB, an unelected body that prides itself on its independence from government, has just taken a decision that has profound implications for German taxpayers – but one that they cannot challenge or change.
At the ECB, the president of the German central bank has just one vote – the same as the presidents of the central banks of Malta or Slovenia. Jens Weidmann, the head of the Bundesbank, cast the sole vote against the bond-buying plans.
Angela Merkel, the German chancellor, may well have given tacit consent to the ECB’s actions and one German member of the ECB council voted with the majority. But opinion polls and media comment suggest that Mr Weidmann’s position reflects majority opinion in Germany. After the ECB decision, the Bundesbank issued a statement arguing that the ECB’s plans are “tantamount to financing government by printing banknotes” and “redistribute considerable risks among various countries’ taxpayers”. Translation: the ECB’s action are illegal and dangerous, and German taxpayers could end up with the bill.
Of course, the Germans – above all – have always revered central bank independence. Under normal circumstances, it is a fine tradition. But in the euro crisis, the ECB is suddenly behaving in a way that veers wildly from the Germanic view of prudent central banking.
So why has Mr Draghi done it? The answer is that he faced a truly hideous dilemma. It was clear that the hundreds of billions of euros committed to European bailout funds have not been enough to ward off the threat of collapsing banks and sovereign defaults across the eurozone. A financial calamity could lead to another Depression, followed by political radicalisation – and a threat to democracy that is much more direct and unsubtle than the menace posed by the ECB.
By contrast, if Spanish and Italian borrowing costs come back under control – and their governments are prodded into making important structural economic reforms – then the ECB’s actions last week could yet be vindicated. Mr Draghi would not only have saved the euro – he would have bought Europe the time it needs to return to growth.
Since 1945, the central idea of the European project was never again to leave a powerful and aggrieved Germany isolated at the centre of Europe. We are now dangerously close to that point.
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