Why is Mario Draghi afraid of the light?

When it came time to violate the European treaties for the introduction of the extraordinary measures of the European Central Bank, Mario Draghi was not concerned at all about the undermining of some fundamental principles.

On the contrary, in July 2012, he promised that the ECB would do everything to support the single currency, and then, with the help of the "justice" shared by the European Court of Justice, has silenced the critics.

Shouldn't a true desire to maintain the European spirit be reflected in a different kind of promise, such as "the ECB would do everything to support the Euro, but within the constraints of the law and of the provisions of the European treaties"?

Unfortunately, no consistent European legislative system has existed for a few years now. The successive waves of the crisis have been replaced with arbitrary regulations, with unpredictable effects, regulations directed predominantly towards keeping central banks safe from being held accountable and towards maintaining the illusion of the solvency of the European banking system.

Aside from the permanent expansion of the quantitative easing program and the taking of the policy rates into the nonsensical negative territory, the only concern of the ECB was to quickly intervene to "defend" the independence of Central banks in the EU.

That is what has happened on the occasion of the searches conducted by the Slovenia police at the offices of the central bank, from where they have taken data needed to investigate the massive bailout of the banking system in 2013, according to Reuters.

In a press release of the police it is stated that "there are valid reasons to suspect abuse by some legal entities when it comes to the evaluation of the capital of a bank that was bailed out by the state in 2013". That is also where it is estimated that the "flawed" appraisal has allowed the bank to cancel the subordinated debts of some creditors, who have seen combined losses of 257 million Euros, according to an article posted on Bloomberg.

The American news agency also writes that the opinion of the European Court of Justice is being expected in the coming weeks, which will have major implications not just for Slovenia, but for the entire European Union as well.

"If the decision of the European Court is that the holders of the subordinated debt have to be compensated, then far more issues will be created for the EU than for Slovenia", said Saso Stanovnik, an analyst with Alta Invest in Ljubljana told Bloomberg.

Isn't obvious what the ruling is going to be?

Once informed about the "oppression" that has befallen the governor of the Bank of Slovenia, Mario Draghi sent urgent messages to the European Commission and the General Prosecutor of Slovenia.

"I formally protest the illegal confiscation of the ECB information and I call upon the Slovenian authorities to remedy this violation of the law", the president of the ECB wrote, according to an article in the Wall Street Journal, and stresses that the "the data is protected by the laws of the European Union, which grants the ECB special immunity".

Mario Draghi also warned that the ECB "is going to explore all the possible avenues of legal action according to the legislation in Slovenia". Such an action will of course enjoy the unconditional support of the European Court of Justice.

Even though the potential abuses investigated in Slovenia have imposed massive costs upon the banks' subordinated creditors, their scale is insignificant compared to the costs imposed upon the entire society, which has headed towards the edge of the precipice amid the exponential increase in lending last decade. In Slovenia as well, the central bank has seriously neglected its functions of oversight and regulation of the banking system.

The latest country report of the IMF shows that Slovenia has recapitalized 6 state-owned banks in 2013 and 2014, at a cost of approximately 12% of the GDP.

Non-performing loans with a face-value of approximately 5 billion Euros have been transferred from 5 banks to Bank Asset Management Company (BAMC), an independent institution which is supposed to sell them by 2022.

The process for the restructuring of the banking system is however, far from over. As is also stated in the latest financial stability report by the Bank of Slovenia, loans granted to non-financial companies have seen an annual decrease of 10.2%, amid a massive degree of indebtedness and delays in the booking of non-performing loans.

The "rescue" of the banking system has caused the explosive growth of the public debt, which rose to 83.2% in 2015, from 53.4% in 2012, according to data from the IMF, which predicts that the indicator will return below 60% of the GDP in 2026.

External imbalances have also increased. The balance of payments deficit has been 10.2% of the GDP in 2015, amid an uninterrupted increase in the trade deficit over the last five years, from 1.2% of the GDP in 2011, up to 9.5% of the GDP in 2015.

But it would seem that nothing else matters, not even the serious deterioration of the country's economic outlook, because its financial stability has been restored, as mentioned in the financial stability report of the central bank in Ljubljana.

Unfortunately, going by how the European banking system is evolving, the appearance of financial stability in Slovenia won't be maintained for long either.

Is this why Mario Draghi and other governors of the central banks in Europe are afraid of the light?