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EURO CRISIS

New challenge filed to stop euro rescue

A prominent German eurosceptic Sunday filed a complaint against the European Central Bank's new bond-buying programme at the country's top court in a fresh bid to block the eurozone's rescue fund.

New challenge filed to stop euro rescue
Photo: DPA

Peter Gauweiler, a lawmaker from the Christian Social Union, sister party to Chancellor Angela Merkel’s Christian Democratic Union, said the €500-billion ($630-billion) new ESM fund should not come into force unless the ECB reverses its new programme.

“The ESM – insofar as it is constitutionally viable at all – should only come into force when the ECB has taken back its self-awarded power as a hyper rescue-shield,” Gauweiler said in a statement.

He said the fresh complaint could call into question the timing of a hotly-awaited ruling by the Constitutional Court in Karlsruhe on a slew of legal challenges to the ESM and the EU’s fiscal pact for more budgetary discipline. That ruling is due to be made on Wednesday.

The ECB’s decision Thursday to buy unlimited amounts of the bonds of struggling eurozone nations has created a “completely new situation” in the court’s deliberations on the ESM, said Gauweiler.

If the Constitutional Court was not able to rule on this latest challenge, it should delay its judgement on the ESM beyond Wednesday, Gauweiler said.

Gauweiler argued the ESM was incompatible with Germany’s constitution because it put Europe’s top economy and paymaster on the hook for unlimited guarantees and thereby removes democratic control over the country’s budgetary planning.

He says that the overall risk to the German federal budget was incalculable, and has filed several legal actions against the euro rescue measures.

The ESM, which will replace the temporary European Financial Stability Facility, should have been up and running by July 1.

But it needs Germany’s share of the rescue money to function and has thus been held up pending the Constitutional Court’s ruling.

Analysts believe the court will not block the crisis tools. A court spokesperson could not be immediately reached for comment.

AFP/DAPD/The Local/mbw

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ECB

Inflation rose in Germany in December: report

Inflation in Europe's largest economy Germany clambered higher in December, official data showed Friday, but remained short of the European Central Bank's target for the 19-nation eurozone.

Inflation rose in Germany in December: report
Prices in Germany are rising, but not as fast as they should be. Photo: Jens Büttner / zb / dpa
Price growth hit 1.5 percent year-on-year last month, statistics authority Destatis said, some 0.4 percentage points higher than in November.
   
And it reached the same level when measured using the Harmonised Index of Consumer Prices (HICP) yardstick preferred by the ECB.
   
But while German price growth was headed in the right direction, it was still well short of the ECB's just-below-two-percent goal. Over the full year 2019, inflation averaged just 1.4 percent.
   
“There is little sign of sustained growing price pressure that could prompt the ECB to rethink its ultra-expansive monetary policy,” said economist Uwe Burkert of LBBW bank.
 
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Here's a graph put together by the German newswire DPA, showing how the inflation rate in Germany has fluctuated between 2008 and 2019. 
 
 
 
The ECB has set interest rates at historic lows, granted hundreds of billions of euros in cheap loans to banks, and bought more than 2.6 trillion euros ($2.9 trillion) of bonds in efforts to keep credit flowing to the economy, stoking growth and inflation.
   
But it has fallen short of its eurozone-wide price growth target for years, predicting last month it would inch up to just 1.6 percent by 2022.
   
Economists have pointed to both uncertainty over political events, like trade wars and Brexit, and long-term developments like ageing populations as possible reasons for sluggish growth and inflation.
   
Under new chief Christine Lagarde, the ECB plans to launch a wide-ranging “strategic review” this year, its first since 2003, that could adjust its tools or even reexamine the inflation target itself.
   
In the meantime, she has urged countries — like Germany — with sound government finances to lift spending in hopes of juicing the economy.
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