ECJ judgment on government bonds: What should the ECB – and what not? – Tagesspiegel

14:50 clock By Rolf Obertreis

the Supreme Court in Europe course is set for the monetary policy in the monetary union. The European Court of Justice (ECJ) judges whether the ECB’s purchase program for government bonds crisis-ridden euro countries is legal.

Ironically, a Greek. Vassilios Skouris has been President of the European Court of Justice (ECJ) in Luxembourg. On Wednesday the 67-year-old announced the verdict on the bond purchase program OMT (“Outright Monetary Transactions”) of the European Central Bank (ECB). Some observers speak of an almost historic decision because it comes to competence of the central bank and about how the EU law can grab. However, the Federal Constitutional Court (BVG) could report again after the ruling of the ECJ. It has the appeal to Luxembourg they’ll end in February 2014, but reserved the last word.
Even if the European judges of the ECB show the red card: Concrete impact has not. OMT has not been implemented and the ongoing QE bond program is structured differently. Constitutional objections against the OMT would probably not transferable, says Commerzbank economist Michael Schubert.

Gauweiler and others consider the program for a breach of law

The starting point for OMT was the serious crisis in the euro zone in the summer of 2012. At that time formulated ECB President Mario Draghi his almost legendary words, after which the central bank was ready to do everything within its mandate to save the euro. The pushed the ECB shortly after behind OMT. It aims at the unlimited purchase of government bonds of the Euro-crisis countries – under strict conditions. After that, the states must first agree on an adjustment program with the euro rescue fund ESM.

Because they keep OMT for a breach of law, lay leaders, including the CSU politician Peter Gauweiler and the former Federal Minister of Justice Hertha Däubler-Gmelin (SPD), a constitutional complaint. 2013 came the SNB to be heard. Bundesbank President Jens Weidmann explained why it considers the purchase of government bonds by the ECB for an indirect state funding, which is banned by the central bank. The former ECB director Jörg Asmussen defended the program. Even the announcement had curbed the crisis and relaxed the situation.

in February 2014 the judges in Karlsruhe came indeed to consider that the ECB’s OMT overstepping their mandate because they thus in fact pursuing economic policy and financiers States. A verdict announced the SNB still not, but pushed the ball to the ECJ. It took again until January of this year to ECJ Advocate General Pedro Cruz Villalón said that OMT is in principle compatible with EU law. A few conditions must comply with the ECB, however. You should not participate directly in aid programs for the country, they must explain the extraordinary circumstances for OMT and leave an adequate distance between the bond issue and the purchase by the ECB. Whether the five seconds or five hours should be Villalón left open.

How to Judge Skouris will decide? Most observers expect that he follows the opinion of the Advocate General. In three-quarters of all cases this is the ECJ that. To date, the judges in Luxembourg have no objection to measures to combat the euro debt crisis. The end of 2012 as they waved the European rescue fund ESM.

The last word Karlsruhe

Commerzbank economist Schubert expects a rejection of the complaint. Important criticism of the OMT would not engage in QE. QE have monetary character, also the ECB buy government bonds of all euro-zone countries and not just of individual countries. Greek bonds are not there. QE is also no strings attached and also there, so Schubert, an upper limit for the purchases.

Even if the ECJ abschmettere the program, this is likely, says Schubert, little effect on the current program in March the ECB, with whom she has not bought bonds, mortgage bonds and securitization totaling nearly $ 255 billion euros. Until September 2016 it plans to invest every month respectively 60 billion euros and pumps so total 1.14 trillion euros into the banking sector and in the economy in order to stimulate lending and combat the economic crisis

Of course. With the verdict of the Court does not have to be done the topic. Not only because the SNB has reserved the word on whether OMT is compatible with the Basic Law. Legal experts in Berlin, so Schubert, ultimately take the view that the judge may make any regulations in Karlsruhe ECB chief Draghi. “But in extreme cases, the SNB could force the German government to renegotiate the EU Treaties.” In addition, entrepreneurs Patrick Adenauer checked a lawsuit against QE. Not only Schubert wonders if now threatens chaos.