ECB President Mario Draghi helped save the euro with his pledge to do “whatever it takes” as lenders prepared for a collapse of the 18-nation currency, an ECB lawyer said at a hearing.
The European Court of Justice, the bloc’s highest court, is weighing whether Draghi’s ECB overstepped its powers in 2012 with the promise to buy the debt of stressed countries if needed. The EU tribunal’s 15-judge panel is examining the plan after Germany’s own top court earlier this year expressed doubts about its legality.
“The numerous cuts to key ECB interest rates made between late 2011 and July 2012 were having almost no effect on certain markets in the euro area,” Hans-Georg Kamann, a lawyer for the ECB said at the EU court today. “Price stability in the euro area was seriously at risk” due to “increasing fears among many market participants that the euro could collapse.”
The Frankfurt-based ECB announced the details of its unprecedented bond-purchase plan in September 2012 as bets multiplied that the euro area would break apart and after Draghi’s promise to do whatever was needed to save the currency. The calming of financial markets that the still-untapped Outright Monetary Transactions program produced helped the euro area emerge from its longest-ever recession in the first half of last year.
The ECB’s plan was an “unlawful usurpation of powers” that would allow the Frankfurt-based bank to “turn the monetary union into a debt union, without consulting the member states or their parliaments,” said Dietrich Murswiek, a lawyer for one of the main claimants in a series of German challenges.