If one were asked to describe the formal economic and political processes that have shaped the condition of the eurozone since the eruption of the euro crisis in late 2009 in a terse and peremptory way, he or she might boldly and truly say this: “German Chancellor Angela Merkel’s policies spearhead the unraveling of the European project while European Central Bank (ECB) President Mario Draghi seeks to keep the (neoliberal) game going.”
Indeed, there is little doubt that Germany’s neo-mercantilism is the driving force leading a sizable segment of the eurozone’s economy on the path to stagnation and decline, while the ECB has been trying hard to carry out the role of a traditional central bank by fulfilling its duty as a lender of last resort in order to save the euro and preserve the eurozone.
The ECB intervened in the euro crisis in May 2010 by buying up government bonds from Greece (even when a 110 billion euros bailout package had been approved for Greece), Spain, Portugal, and Ireland under its Securities Market Program. By 2011, the ECB was buying up Spanish and Italian bonds by the bucketload in order to force a drop in the bond yields of the two largest peripheral economies of the eurozone. With the end of the crisis in the periphery nowhere in sight, but Mario Draghi having already pledged in July 2012 to do “whatever it takes” to preserve the euro, in early September of that year the ECB introduced a new government bond purchasing program, known as the Outright Monetary Transactions (OTM) program.
Leaving aside the question as to whether or not ECB’s OTM program is legal (Advocate General Pedro Cruz Villalón opined in mid-January 2015 that while “the OTM programme is an unconventional monetary policy measure . . . it is compatible with the TFEU [Treaty on the Functioning of the European Union]”), the condition was that OTM would be attached to an appropriate European Financial Stability Facility/European Stability Mechanism (EFSF/ESM) macroeconomic adjustment program. In other words, the imposition of austerity, privatization, and market liberalization was a conditionality in the event of the implementation of the OTM program, which raises an important question: Is the ECB seeking to enforce an economic policy measure rather than just a monetary policy measure? continue reading…