Draghi is Doing Merkel’s Job

ECB’s Draghi to Lobby – WSJ.com.

There is no serious Bundestag opposition to any of the bailout shenanigans that have been presented. The ESM and the Greek bailout passed overwhelmingly with support on both the right from Merkel’s own CDU and the left from the SPD.

The main opposition to the bailouts has been the Bundesbank. They will continue to oppose money printing just like evangelists oppose abortion; it’s what they do.

The problem with German politics is that the politicians have not been truthful about the true cost of keeping the euro together. Draghi is being unfairly blamed for all of the monetary hijinks, but he is just doing all he can with a limited set of options.

His trip is meant to smooth things over with the German electorate, but he is really doing Merkel’s job. She must be honest with the voters and explain the true cost of the keeping the euro together and why it is important to expend these sums.

Billions of euros have been spent to bailout Greece, and the ECB has expanded its balance sheet massively in an attempt to get ahead of the crisis. Even these sums have proven insufficient, and more money will be needed in the coming years. Spain’s bailout alone will eat up the entire ESM.

One day, Germany will wake up and realize that they are on the hook for hundreds of billions of euros, and someone will have to pay for this. The politicians will pay with their jobs, but the taxpayers will be stuck with the real bill.

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2 thoughts on “Draghi is Doing Merkel’s Job

  1. You are far too easy on Draghi. He deserves all of the blame he can get. His OMT program is ILLEGAL, it violates the founding principles of the EMU, and it goes far beyond his “limited set of [legal] options.” It is, in effect, debt mutualization by bureaucratic coup-d’etat, and the Bundesbank is completely justified in its opposition.
    Your other points regarding the behaviour of politicians are very well taken. This cannot go on forever, though, even in Germany. With the ESM requiring paid-in capital, economies contracting, and Fiscal Compact deficit targets in place, politicians are going to have to start asking their taxpayers for real money very soon.

    • OMT is probably illegal. If the ECB were buying small amounts of sovereign bonds to affect monetary policy, this action would fall under its mandate. OMT is the financing of governments, plain and simple.

      Draghi’s job is to keep the euro from dissolving. It is understandable that he will do whatever is necessary during the crisis, because he will be blamed for whatever happens.

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