Monetary v. Economic Policy: A Bug in the Maastricht Design?

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With an order issued on 14 January 2014, the German Federal Constitutional Court (FCC), for the first time in its history, referred a question to the Court of Justice of the European Union (CJEU) for a preliminary ruling under Article 267(1) of the Treaty on the Functioning of the European Union (TFEU). The controversy concerns the Outright Monetary Transaction (OMT) programme, consisting in the potentially unlimited purchase of sovereign bonds by the European Central Bank (ECB) on the secondary market.

The OMT case is situated at the crossroad of a bundle of legal, economic and political issues. In particular, it directly concerns the asymmetric construction of the Economic and Monetary Union, as designed in the Maastricht Treaty, and now based on the rules contained in Title VIII of Part III of the TFEU. In particular, the Economic and Monetary Union is built on the separation between a “single monetary policy”, governed by the ECB, and the “close coordination of Member States’ economic policies”, whose definition remains the competence of the national governments. The definition of the boundaries between “economic” and “monetary” policies is, indeed, at the heart of the dispute between the FCC and the ECB.

The paper will argue that such controversial separation between “economic” and “monetary” policies reflects a wrong political choice made at the time of the Maastricht Treaty, based on a neoliberal approach that has proven to be inadequate to face the challenges brought by the financial crisis. To this end, the paper will investigate the (strictly interconnected) legal and economic issues deriving from the separation, operated by the Treaty, between “economic” and “monetary” policies. In particular, the legal and the economic arguments will be jointly analysed in order to demonstrate how the attempt to “constitutionalise” a flawed economic theory has resulted into a number of legal contradictions, some of which have reached the surface in the OMT case. The paper aims, therefore, at investigating the legal and economic issues deriving from the separation, operated by the Treaty, between “economic” and “monetary” policies, and to present a set of proposals to correct and overcome the Maastricht design.