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Varoufakis sues the ECB over decision to freeze liquidity for Greece

Former Greek finance minister Yanis Varoufakis and German left-wing parliamentarian Fabio De Masi (Die Linke) are suing the European Central Bank to gain access to a document underpinning the ECB’s decision to freeze vital funding to Greek banks in 2015 that resulted in forcing Athens to impose cpaital controls.

That move left Alexis Tsipras’ government with little choice but to shut down banks and impose capital controls, weakening his negotiating position with the country’s international lenders during bailout negotiations.

Eventually, hard-liner Varoufakis resigned and Tsipras made a deal that gave Greece cash in return for austerity measures and reforms.

Varoufakis and De Masi, are asking the European Union’s top court to force the ECB to disclose a legal opinion that informed that decision, which they say might be unlawful.

“By restricting liquidity to the Greek banking sector to force cuts in pensions, tax increases and fire-sale privatisations, the ECB overstepped its mandate,” De Masi said.

After their request was rejected by the ECB, Varoufakis and De Masi are turning to the General Court of the European Union to obtain the document.

An ECB spokesman said the legal opinion preceded the decision to withhold funding by at least two months. The ECB decided not to disclose it to protect its legal advisers and its internal deliberations, he said.The ECB’s Agreement on Emergency Liquidity Assistance (ELA), published earlier this year, prohibits national central banks from providing ELA if it “interferes with the objectives and tasks” of the Eurosystem, such as maintaining price stability and safeguarding payments.

“There is an overriding public interest in knowing how far the ECB … weighed different goals against each other and how they themselves and their legal experts have interpreted the legal framework in this respect,” the complainants’ lawyer, Andreas Fischer-Lescano, said in the appeal. [reuters]

Background

Before taking the decision to freeze liquidity to Greece and therefore enforce the imposition of capital , Mario Draghi commissioned a legal opinion from a private consulting company.  Purpose of the company was to research about the legality of the imposition of capital controls in Greece. The ECB chief  wanted to know whether the ECB had to right to freeze liquidity to the banks of a sovereign country given the statute of the bank.

The European Central Bank has repeatedly  “declined to reveal the content of report of the consulting company, claiming an odd excuse: respect for the company’s confidentiality.”

Together with French Socialist Party candidate for the Presidency Benoît Hamon the ex finance minister launched a campaign to force Draghi to publish this legal report. For this purpose they launched a petition in February which has the title “What are you afraid of  Mr Draghi?

In November, the ECB denied European Court of Auditors (ECA), the watchdog of EU finances, access to Greek bailouts information. The ECA wanted to examine the ECB role in the Greek bailouts and reforms program. The ECB denied access to information claiming again “banking confidentiality” reasons.

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2 comments

  1. Martin Baldwin-Edwards

    The legal setup and the behaviour of the ECB are a major scandal in the history of the EU. The crazy idea that a central bank should be unaccountable comes from neoliberal propaganda, and is no way to run a country, let alone the European Union. Let’s hope the courts share my view.

  2. @ Martin Baldwin-Edwards Excellent description of this shameful situation.