A lot of questions have come in about the fall of the Eurozone. One thing that they are already discussing is to allow the member states with a debt crisis like Italy that is unsustainable to exist the Eurozone. They are already discussing that Northern Europe will reconfigure itself into a smaller Eurozone to try to say the system and the currency. This is in part why NATO, including American Neocons, are actively pushing for war with Russia for they fear when the Eurozone collapses, NATO will no longer be in a position to wage war.
The stupidity of the EU leaders has been accelerated by their hatred of Donald Trump. The Neocons and NATO are egging them on using their hatred of Trump to ensure that they will choose war rather than peace. Then with just one member state like Italy being pushed to the brink, we will see what took place in 2010 with Greece, which was just 2% of GDP compared to the Eurozone. Italy is about 15%. There is no possible way for the ECB to bail out Italy or France. They already hold €5 trillion in sovereign debt on their balance sheet.
European Court of Justice (ECJ) did not rule that the ECB cannot increase its balance sheet unlimitedly. In fact, the ECJ has consistently upheld the ECB’s broad discretion in conducting monetary policy, including large-scale asset purchases. However, a major and highly controversial ruling by the German Constitutional Court (Bundesverfassungsgericht) in May 2020, challenged the ECJ and the ECB on this very issue.
In May 2020, the German court issued a landmark ruling that directly contradicted the ECJ. It stated that the German government and the Bundesbank (Germany’s central bank) had violated German constitutional law by participating in the PSPP without properly ensuring the ECB had conducted a “proportionality assessment.” The German court argued the ECB had not sufficiently analyzed the economic and fiscal policy effects (like impacts on pensions, real estate bubbles, and savings) of its multi-trillion-euro program.
The core of the ruling was that the ECB had potentially overstepped its monetary policy mandate and veered into economic policy, which is reserved for member states. It gave the ECB three months to provide a proportionality assessment, or the Bundesbank would have to withdraw from the program. This was an unprecedented challenge: A national court effectively declaring an ECJ judgment “ultra vires” (beyond its authority) and threatening to break the unity of the Eurosystem.
This colors the possibility that the ECB can just monetize the debt of any country in default. The ECB, while strongly defending its actions, provided additional documentation and analysis to demonstrate it had considered the proportionality of its measures. The German government and parliament engaged in a review process to satisfy the court.
In April 2021, the German Constitutional Court closed the case, accepting the provided documents as sufficient, thus ending the immediate crisis. The Bundesbank continued its participation.
The Ruling Was About Mandate and Procedure, Not a Hard Limit. Hence, there is no official cap. Neither court established a specific limit (e.g., €5 trillion, 50% of GDP) on the ECB’s balance. This was a Political Warning Shot! It served as a powerful political warning from Germany to the ECB that its policies were being watched closely for overreach, especially as it moved into newer programs like the Pandemic Emergency Purchase Programme (PEPP).
The European Court of Justice ruled the ECB can use large balance sheet expansions. The challenge came from a national court (Germany’s), which argued such expansions must be rigorously justified and remain within the ECB’s monetary policy mandate. The ultimate result affirmed the ECB’s actions but under heightened scrutiny, not with a fixed balance sheet ceiling.
This hangs over the head of the ECB in the event of a member default. This is why my sources are talking about preparing for the DISSOLUTION of the Eurozone by jettisoning troubled states in a desperate effort to retain the EU Parliament and power.
