new European Central Bank in Frankfurt
The European Central Bank m ust always buy government bonds, according to an expert at the European Court of Justice. A program of the Federal Reserve was lawful, wrote the influential Advocate General on Wednesday in Luxembourg. Condition is that the ECB such purchases is founded, and they were relatively well.
In the present case involved an action brought against the ECB’s announcement from the summer of 2012, if necessary indefinitely to buy government bonds of crisis countries to keep this solvent. At that time there was highest nervousness in financial markets. There has been speculation about a withdrawal of individual countries in the monetary union. ECB President Mario Draghi had then calm the markets with his statement that the ECB would do “whatever is necessary” to preserve the euro. In practice, the ECB has not been used by professionals as the “Outright Monetary Transactions” (OMT) program known – but the announcement was enough time to mitigate the Euro Crisis
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© dpa Mario Draghi
Mario Draghi
The opinion of the expert to the European Court is often regarded as a preliminary decision. The ECJ does not follow t he recommendation of the Advocate General, but it does in most cases. However, the judge followed the Advocate General in particularly controversial cases, not always – as in the case of the “right to be forgotten” on the Internet. The final judgment of the judge is expected in the fall.
In the case turns on the question of whether the ECB has exceeded its powers when it announced an unlimited purchase of government bonds. The primary objective of the ECB is officially a stable price level. Critics fear that the program could lead to finance crisis countries by printing money by the ECB. Therefore had against the program of the CSU politician Peter Gauweiler, former Justice Minister Herta Däubler-Gmelin (SPD), the Pa rliamentary Group of the Left and the association “More Democracy” complained. Nearly 12,000 other applicants joined. The Federal Bank sees the program very Krisch, because the ECB therefore be issued on a slippery slope of monetary state financing. The Federal Constitutional Court had also expressed serious doubts about the constitutionality of the decision but he then transferred to Luxembourg and thus enter new legal territory.
The publication is for the ECB at an important time. Next week, the Governing Council may decide on new anti-crisis measures. Many economists now believe it for granted that the Governing Council will soon decide on the purchase of corporate and government bonds on a large scale. This policy will be discussed under the heading of “quantitative easing” (QE). While it comes to the purchase of government bonds in crisis situations when OMT program, a QE program would be broader and could also include other asset classes other than bonds.
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While it is in the process in Luxembourg formally only to the ECB’s announcement of 2012, but over the then announced bond purchase program, the Luxembourg expert specifies the line, the possibilities, the ECB has basically in its monetary policy. In his Opinion formulated Advocate General Pedro Cruz Villalón conditions under which the purchase was a program of government bonds with European law. The ECB should not buy directly from affected States, but only on the so-called secondary market bonds. There, the Bank should not be allowed to buy immediately and had to elapse certain periods, so that may constitute a market price of government bonds. In addition, the ECB must stay out of the provisions applicable to an affected state reform programs.
According to Cruz Villalón the ECB should “have a wide discretion” in its monetary policy. Courts should be able to control the central bank only “with a significant degree of restraint” because they lack the experience in this field. Concerning limitation of bond purchase programs of the ECB Cruz Villalon said during the reading of his Opinion anything.
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