Today in the German Constitutional Court at Karlsruhe a case begins which could signal the end of the Eurozone. Or not.
The head of the Bundesbank, Jens Weidmann, is asking the Court for a declaration that the European Central Bank exceeded its mandate when it said last year that it would be prepared to buy up the sovereign debt of troubled southern peripheral member countries. ECB head Mario Draghi's Outright Monetary Transaction mechanism is widely credited with putting a cap on bond yields in Spain and Italy, thereby preventing default and Eurozone break up.
Now the Court has no jurisdiction over the ECB, but it does over the Bundesbank, and it could in theory declare that Germany's central bank could not lawfully take part in Draghi's scheme. OTR has cast such a formidable spell on the bond markets that no country has yet had to use it, and what would happen to bond yields if the Court ruled OTR unconstitutional is anyone's guess.
But while we're in the business of guessing, my money is on the Court finding in favour of the ECB.
Why?
Because the great and the good in continental Europe have been brought up on Every Closer Union with their mother's milk. If I had to bet the mortgage, I'd wager that the eight judges of the Bundesverfassungsgericht won't upset the apple cart.
