Trichet should be fired

Just a bit more than a year ago, I wrote a post titled Trichet should resign. Today, with the ECB and EU bailout package, I understand that I made a mistake:

ECB Press Release (via Mish)

In view of the current exceptional circumstances prevailing in the market, the Governing Council decided:

1. To conduct interventions in the euro area public and private debt securities markets (Securities Markets Programme) to ensure depth and liquidity in those market segments which are dysfunctional. ...

2. To adopt a fixed-rate tender procedure with full allotment in the regular 3-month longer-term refinancing operations (LTROs) to be allotted on 26 May and on 30 June 2010.

3. To conduct a 6-month LTRO with full allotment on 12 May 2010, at a rate which will be fixed at the average minimum bid rate of the main refinancing operations (MROs) over the life of this operation.

4.To reactivate, in coordination with other central banks, the temporary liquidity swap lines with the Federal Reserve, and resume US dollar liquidity-providing operations at terms of 7 and 84 days. These operations will take the form of repurchase operations against ECB-eligible collateral and will be carried out as fixed rate tenders with full allotment. The first operation will be carried out on 11 May 2010.

The ECB actions are illegal, as clearly showed by David Rosenberg, who points to These are the famous “no bailout” provisions of the EU Treaty:

Article 101 prohibits “overdraft facilities or any other type of credit facility with the European Central Bank or with the central banks of Member States” (ie, Neither the ECB nor other central banks can lend) to “central governments ... or other public authorities.” Period. Prohibited — tsk, tsk, tsk.

As for quantitative easing, it “shall be prohibited as shall the purchase directly from them” by the ECB. (Oh — so we’ll circumvent that by having the national central banks do the bidding — literally.) The ECB is constitutionally prohibited from lending money to the Greek central bank or buying their notes directly.

The Treaty on the Functioning of the European Union (2008/C 115/01)
Article 123 (ex Article 101 TEC)
1. Overdraft facilities or any other type of credit facility with the European Central Bank or with the central banks of the Member States (hereinafter referred to as “national central banks”) in favour of Union institutions, bodies, offices or agencies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States shall be prohibited, as shall the purchase directly from them by the European Central Bank or national central banks of debt instruments.
2. Paragraph 1 shall not apply to publicly owned credit institutions which, in the context of the supply of reserves by central banks, shall be given the same treatment by national central banks and the European Central Bank as private credit institutions.

Article 124 (ex Article 102 TEC)
Any measure, not based on prudential considerations, establishing privileged access by Union institutions, bodies, offices or agencies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States to financial institutions, shall be prohibited.

Article 125 (ex Article 103 TEC)
1. The Union shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of any Member State, without prejudice to mutual financial guarantees for the joint execution of a specific project. A Member State shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of another Member State, without prejudice to mutual financial guarantees for the joint execution of a specific project.
2. The Council, on a proposal from the Commission and after consulting the European Parliament, may, as required, specify definitions for the application of the prohibitions referred to in Articles 123 and 124 and in this Article.

Article 126 (ex Article 104 TEC)
1. Member States shall avoid excessive government deficits.


Now, how can one put a claim against these illegal actions? Anyone?