EU’s £677bn coronavirus rescue package deal may be ILLEGAL, says expert

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The legislation, which would override some aspects of the Withdrawal Agreement relating to Northern Ireland, passed its second reading in the House of Commons last week. The EU is threatening legal action unless the bill is withdrawn at the end of the month, with critics seized on Northern Ireland Secretary Brandon Lewis’s admission it would break international law if implemented.

However, Pieter Cleppe, a Brussels-based research fellow with the think tank Property Rights Alliance, believes there are also serious questions to be asked about the legality of the bloc’s £677billion coronavirus rescue package.

Mr Cleppe was speaking after the European Central Bank’s Governing Council confirmed it was continue its purchases under the pandemic emergency purchase programme (PEPP) with a total envelope of €1,350billion (£1.23billion).

He explained: “The ECB prints money, lends it to banks at artificially low rates, and then buys up government bonds from banks, instead of directly from governments, which would be outright illegal.

“Technically, they claim it’s legal, but of course this amounts to printing money to lend it to governments, so it violates the spirit of the ban on monetary financing.

“In a democracy, governments should be financed by parliaments, not by central banks.”

The PEPP was launched earlier this year at the height of the coronavirus pandemic in an attempt to keep borrowing costs down and stop the pandemic from turning into a sovereign debt crisis.

The money effectively bankrolls the EU’s coronavirus package, which was ratified at the European Council meeting in June after four days of wrangling, with critics in the north of the bloc fearful it would trigger runaway public spending in the south, especially Italy.

Mr Cleppe is not the first to suggest the PEPP scheme exceeds the ECB’s mandate.

Last month members of Germany’s right-wing AfD party announced it was planning to sue the Bundestag over the PEPP’s constitutionality.

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Speaking in June, on the day the ECB extended the PEPP until 2021 and increased it by 600 billion euros, former German MEP Hans-Olaf Henkel told the proposal was “grotesque”.

In reference to a decision by a federal German court in Karlsruhe which orderd the ECB to justify its bond buying scheme or lose Germany’s Bundesbank as a participant, Mr Henkel said: “Instead of reacting to the verdict of Germany‘s Constitutional Court the ECB decided to do the same as before, in fact more of the same, much more.

“For years, the ECB throws huge amounts of euros into the financial markets with the objective to achieve ‘an inflation rate of close to but below two percent’.

“This is grotesque. Apart from the fact that before the euro a Central Bank’s role was to control inflation and not to increase it, the ECB never achieved that goal.

“As a result, the ECB acts like a medical doctor prescribing a certain medicine and, after realising that it doesn’t work, rather than change the treatment, constantly increasing the dose.”

Bundesbank chief Jens Weidmann yesterday defended the European Central Bank’s bond purchases in the face of criticism during a closed-door session with German politicians.

According to participants, speaking on the condition of anonymity, Mr Weidmann said he could not see an “obvious violation” of the ECB’s rule to avoid monetary state financing.

The European Commission declined to comment on Mr Cleppe’s remarks.

An ECB spokesman said of the suggestion that the plan was illegal: “This is inaccurate. There is a wealth of factual information on our website.”

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