What exactly happened in the Eurozone this week? Something about a German court & the ECB?

It's complicated, but has implications for the Eurozone's #COVID19 recovery & the EU itself.

What follows is my attempt to help me (& my students) understand what happened

Let's start with some background.

As is now well know, European countries have been hit hard by #COVID19 (graph from @FT)
But the economic pain was not shared equally. As is well known, hardest hit by the virus was Italy, which was already one of the weaker economies in the eurozone. Same for Spain

Source: https://gisanddata.maps.arcgis.com/apps/opsdashboard/index.html#/bda7594740fd40299423467b48e9ecf6
This matters because it reinforced what is known as the "North-South" divide in Europe: the relatively wealthier northern countries v the relatively poorer southern countries.

But a deal wasn't reached, largely due to the north-south fissure. As @SeanDEhrlich wrote at @duckofminerva, this echoed earlier failures at a joint european economic response (such as during the 2008 eurocrisis)

The lack of a "fiscal" response means the only means of responding is with monetary policy. In the Eurozone, that means the European Central Bank
And ECB President @Lagarde acknowledged the unprecedented nature of the ECB actions https://twitter.com/Lagarde/status/1240414918966480896
But this was apparantly the last straw for the German High Court, which finally ruled a a long term legal challenge to ECB actions by German politicians and economists
@syrpis offers a helpful and detailed thread of the decision's legal aspects. The key point is this: the German court is claiming superiority over the ECJ to interpret European Law. It's striking down a ECJ ruling. https://twitter.com/syrpis/status/1258018951843450880
That's controversial because it essentially flips the script: EU Law is subordinate to Member state law. It's not supposed to work that way.
Similarly, @HelenHet20 says that the historical context is all important. If you take that into account, the German court decision is not surprising https://twitter.com/HelenHet20/status/1257987288908382208
@HelenHet20 is pointing to the deeper historical context: that Germany & France were the key players in creating the Maastricht Treaty (which officially established the EU & the Euro) https://twitter.com/ProfPaulPoast/status/1192838454121553920
Benjamin Haddad points to this more fundamental issue: a lack of common European fiscal policy (or, more precisely, fiscal coordination on the part of the European states) https://twitter.com/benjaminhaddad/status/1258069994316931072
And while @BVerfG's decision is not #Gerxit, it is the latest instance of a EU member state asserting its sovereignty over the EU.

Germany's critical role in creating both the EU and the Euro makes this particular "assertion of sovereignty" highly impactful.
So while complex, exploring this event teaches one a lot about the EU, the Euro, sovereignty, and the future of global monetary politics.

Oh, and it also could impact Europe's ability to economically recover from #COVID19, which might be its most important implication.

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