Wednesday, on a flight from Brussels to Boston, the NSA agent sitting next to me had a transcript from a telephone conversation between Herbert Landau, who is a judge on Germany’s Federal Constitutional Court, and Mario Draghi, President of the European Central Bank.

For non-Euro buffs, the German Court said last week that Draghi’s offer in 2012 to buy as much government bonds on the financial markets as he saw fit, which is widely claimed to have brought down the Euro crisis from scary heights, was most likely illegal under European Union law. But the final ruling will only come after the European Union court had its say.

Angela Merkel: “I usually do whatever it takes to avoid Karlsruhe rulings.”

Herbert Landau in Karlsruhe calls Frankfurt …

Herbert: “Can I speak to Mario Draghi?”
Mario: “Speaking.”
Herbert: “What did you mean when you said you would do whatever it takes to preserve the Euro?”
Mario: “That I was ready to defend the Euro, no matter what.”
Herbert: “Is it really your job to defend the Euro?”
Mario: “Excuse me?”
Herbert: “Is that within your mandate, defending the Euro?”
Mario: “I would think so, I am the Central Banker.”
Herbert: “I see. I am the Constitutional judge of your largest shareholder.”
Mario: “I am the lender of last resort. It must be within my mandate to put up the last defence when markets attack. Markets are driven by animal spirits. I need to tame them.”
Herbert: “I am a constitutional judge; my job is to tame you. Did you act within the limits of your mandate? Did you consider more limited approaches to taming those markets?”
Mario: “Either the lion eats me, or I eat the lion. And to kill a lion I prefer a bazooka.”
Herbert: “You could use a handgun for that, no?” Continue reading →