The Constitutional Court of Germany set to judge the Eurozone

Constitutional Court of Germany

The sentiment among investors across Europe is one of fear, aversion to risk and unwillingness to look further searching for bright spots. In fact, according to the BlackRock Investor Horizon Survey–made in conjunction with YouGov–, 35pc of investors have resorted to saving more in cash and deposit accounts. Some 45pc said they prefer to avoid the long-term picture altogether, dipping a little toe that they can take out fast from the waters of the markets.

Who would blame them? This is probably the right attitude when the future of the entire Eurozone seems to depend on a simple ruling by the Federal Constitutional Court of Germany.

Mario Draghi, the nerves-of-steel governor of the European Central Bank, appeared unconcerned. But it is sadly revealing, regarding the travails the Eurozone and the European Union are going through, that a few German judges can between next Tuesday and Wednesday derail the securities market programme, the European stability mechanism and the outright monetary transaction facility (OMT)–all of which are fancy names for bailout funds and tricks for different degrees of financial rescues under various disguises.

In a strategy note, Banco Santander in Madrid today said that most of the largest investors “we have been talking to agree that the current rally on European peripheral markets is supported by the belief that the OMT will be triggered in case of necessity.” Investors, analysts added, aren’t exactly anxious but “the decision in Germany is very important.”

It is something more, though: it is proof of a badly constructed European project weakened by the economic turmoil of these days and some ancient archetypes based on mistrust, as the director of the London School of Economics, Craig Calhoun, recently explained to The Corner’s correspondent in Madrid. Ahead of the first court sessions, the Frankfurter Allgemeine Sonntagszeitung has published that the OMT–designed to purchase government debt of states in distress–had a threshold of €524 billion; through a spokesperson, the ECB said that wasn’t true. Der Spiegel, in the meanwhile, reported that the International Monetary Fund seeks more haircuts on Greece’s public debt, something that Berlin strongly opposes.

Amid this environment, it should amaze us that so far in June in countries under stress like Spain some €7 billion debt has been issued by government agencies, €4 billion by corporates–and €3,4 billion of covered bonds!–with bid-to-cover rates of 1.4 to 2.3 times the initial offer.

The Eurozone shows an inner resilience worth a praise, but also some honesty. Governments in Berlin must speak up their minds, instead of using the national judiciary system and some probable legal ambiguities to delay the urgent steps of more integration. Governments elsewhere, from Madrid and Paris to Athens, must come clean, too, and ask for help to carry out reforms they have been incapable of delivering. Let’s get on with it.

About the Author

Victor Jimenez
London contributor at, reporting about the City and the Eurozone economies. He regularly writes for Spanish newspaper group Prensa Ibérica--some of his features include shared work with journalists of The Daily Telegraph and the BBC.

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