The euro regains its introductionof during January 1999 – BBC

The euro regains its introductionof during January 1999 – BBC

The European currency fell to a new low for nine years. The prospect of ECB action is reinforced by the words of Mario Draghi and favorable decision of the European Court of Justice.

The euro took a facelift. It happened Wednesday at 1.1727 dollar, under his introductory course of 4 January 1999 to 1.1747 dollar, on the screens of trading rooms around the world. “It is more symbolic than anything else,” said Gilles Moec, economist at Bank of America. The euro is at its lowest level against the dollar in nine years, but it is far from its record low of 0.8272 dollars, reached in October 2000. At that time, the European currency, in its infancy, was saved by concerted action by the G7 central banks.

If the euro fell today is because of the proposed action by the ECB to leave the Old Continent trap deflation strengthened by the oil drop. The European Central Bank is planning to run its “printing money” to buy back government debt, as do the Fed, the Bank of England and the Bank of Japan in crisis situations. This controversial technique of monetary policy, called “QE” – quantitative easing in English -, is to create additional euro, which always results in a depreciation of the exchange

The assumption of QE. was reinforced by Mario Draghi, who pleads again for monetary policy “expansive” in an interview with the German press on Wednesday. Action is expected next week, January 22

Another important element weighed on the euro exchange rate. The decision of the European Court of Justice (ECJ) which validated in his submissions, the famous “bazooka” of the ECB, brandished in 2012 by Mario Draghi to rescue states, attacked on the markets. According to the Advocate General of the ECJ, the debt buyback program of state, called “OMT” (monetary securities transactions), is compatible with the European Treaties. For investors, it throws the last legal hypothec on the expected action of the ECB, “while the QE and the WTO are two very different animals,” says Gilles Moec.

The ECB welcomed the decision of the Court on his Twitter account. But the WTO has never been used. This weapon of “lender of last resort”, which allows the ECB to buy state debt in quantity “unlimited”, remained in the bank’s drawers. Its very existence was enough to deter speculators mid-2012 when the euro area was about to explode.

In Germany, where the action of Mario Draghi is challenged, politicians and economic, law professors, and the left-wing party Die Linke attacked the OMT program of the ECB before the German Constitutional Court, which declined jurisdiction in favor of the European Court of Justice in 2014.

The problem for the Germans, the monetary financing of states by the ECB, forbidden by the Treaty of Maastricht. Argument swept the floor of the European Court of Justice: the secondary market transactions are legal, says the ECJ, “otherwise the Eurosystem would be deprived of a vital tool for the ordinary conduct of monetary policy” <. / p>

The Court also poses some limits to the ECB action in times of crisis. If it uses the WTO, it will have to justify in detail and show “prudence” to avoid “speculative behavior”. According to the Advocate General, there must be a price difference between the primary market (debt issue) and the secondary market (debt purchase already issued). This is to ensure “the formation of a market price of public debt.” The ECB will also refrain from participating in a program type troika if it triggers an OMT in order to properly limit its role to monetary policy, so that the ECB does not interfere in economic policy also states .