Brussels prides itself on well-honed ways to bring recalcitrant governments to heel. “We have instruments of torture in the basement,” jokes Jean-Claude Juncker.
Europe’s cheerful chief enforcer tests our humour. The methods deployed against a string of distressed nations from 2010 to 2014 were illegal, unconstitutional, and scandalous, though carried out with the complicity of vested interests in each country. This created a cloak of legitimacy.
Athanasios Orphanides, a former governor at the European Central Bank, says the nuclear weapon is the ECB’s control over sovereign bond spreads and liquidity for the banks. “They threaten governments that misbehave with financial destruction. They try to scare them into voluntary acceptance of policies,” he said .
“They cut off refinancing and threaten to kill the banking system. They create a roll-over crisis in the bond market. This is what happened to Italy in 2011,” he said.
Prof Orphanides, now safely distant at MIT in Boston, says the ECB was careful not to leave a paper trail or take decisions that could be challenged in court. “They operate in a grey area without clear legal authority.”
The trick is to work hand in glove with the Eurogroup, the Star Chamber of EMU finance ministers that is accountable to no democratic body and is essentially under the control of the German finance ministry. “What happens is that everybody at the Eurogroup meeting gangs up on the country they want to attack,” he said.
One saw the reflexes of an authoritarian proto-imperial entity during the crisis.