Colm McCarthy: Germany now biggest threat to euro
EU's biggest economy wants all the benefits of currency but none of the responsibilities.
The spa town of Karlsruhe in southwest Germany houses the headquarters of the federal Constitutional Court. During the week, the court commenced hearings on an action by German citizens and politicians seeking a declaration that the German government acted unconstitutionally in supporting a plan announced by the European Central Bank last September.
Briefly, the ECB pledged to backstop eurozone sovereign debt markets through direct purchases of bonds already in issue. The ECB is not allowed to finance governments directly under the EU treaties. The ECB's intention was to prevent a meltdown in the Spanish and Italian bond markets, which would have meant the end of the eurozone.
Prior threats to smaller countries such as Greece, Portugal and Ireland had not merited such vigorous intervention, since they were deemed SETF, small enough to fail. But a collapse in Spain's government bond market would likely have been accompanied by a collapse in Italy, meaning game over for the euro.