€ 60 billion, month after month. In a big way, the European Central Bank (ECB) has been buying this spring on securities. The majority of purchases accounted for by government bonds. The program is controversial, since it was decided in January. First it brought German savers to the last hints of credit interest, it caused unprecedented turbulence in the markets for government bonds.
liked Given the din to actual bond purchases in recent months, hardly anyone has other transactions with government securities, which the ECB indeed decided, but never applied upset. Here’s how it looked in between like this, as if the judgment of the European Court of Justice (ECJ) on a central program from the year 2012 with the technical title OMT little more than a formality.
But Alexis Tsipras has changed the game. Because the Greek government continues on its collision course, increases the risk of a Greek sovereign default and a euro exit. And thus also the risk that the financial markets again erupts panic that spreads to other European countries.
cure for panic
For just such a scenario, but was conceived the OMT program at that time. There is at crucial points knit unlike this year launched bond purchases. And could be important now at a time yet again. Therefore, it is at once again more than incidental, if the Court considers this program to be legitimate or for unauthorized public finance with the printing press.
The ECB speaks officially abstractly of “Outright Monetary Transactions”, so extraordinary monetary policy operations. What this means is that the central bank in an emergency can buy up government bonds quite certain euro countries and that an unlimited amount.
is the adopted in September 2012 program something like the formal design of the promise of European Central Bank President Mario Draghi, the central bank will do within its mandate everything to save the euro.
This the intention of the program differs markedly from the 2015 started government bond purchases, which are usually referred to by their example in the United States and Britain as “quantitative easing” or short QE.
the battle against deflation
This concerns the central bank about fighting deflation threats by flooding the markets with more than a trillion euros of additional money over one and a half years.
This is to stimulate growth and thus indirectly the price development. In order to bring this money into circulation, it buys securities and government bonds have to be with the most secure papers for doing so.
The fact that the debt interest for the sink crisis countries in Europe, although is certainly a welcome side effect, but not the main objective. This is already evident in the design of the QE-Progamms.
Because the ECB shares the bond purchases according to their capital key to the euro area countries on. Almost a third of purchases account for why federal bonds yielded a record low returns before the start of the program. But Germany is now one the the largest euro country and therefore has the greatest weight in the basket of bonds.
This limits the effect on individual countries, particularly since the ECB has agreed to buy no more than one third of all outstanding bonds of a State. Also another feature of the QE program shows that it is not about a support individual countries through the Euro-Community:. The default risk for the purchased government bonds of a country is formally exercised by the national central bank
support for the weak
situation is quite different in the “Whatever-it-takes” initiative dating back to 2012.. It is decidedly meant for the support of individual countries. The ECB therefore justified their intervention when it comes to risk premiums on government bonds of certain euro-zone countries, which itself ranks the Central Bank as irrational. These exaggerations, they would fight in this case with bond purchases
The big advantage from the perspective of the ECB. This crisis can be controlled very accurately – if the central bank about only Portuguese bonds would support, they would not have loads of bonds of other euro area countries with buying.
In addition, the risk of the bonds share in this case, all Euro- countries, which strengthens the character of support from Community funds. In turn, the ECB
is on a reform program that would negotiate with the euro countries and the International Monetary Fund. OMT program highly controversial
The program has so far never used the ECB – 2012 alone reached the decision made to appease the previously hyper nervous financial markets. The more controversial OMT was from the beginning.
Bundesbank President Jens Weidmann turned publicly against it because he saw too much proximity to the monetary state financing, the EU treaties forbid the ECB explicitly. The Federal Constitutional Court announced on serious concerns, however, the procedure referred initially to the ECJ. There, judgment will now fall on Tuesday.
financial experts as EU Rechtler but do not expect a serious cross-shot from Luxembourg. The important in European litigation appraiser was the bond purchases by crisis countries in January lawful
The central bank should -. If you ever use the program – explain their steps, establish and keep out of the reform program of the country concerned. All conditions that would hardly restrict the effects of OMT in an emergency.
However, the ECJ is not bound in its judgment on the recommendations of the expert. And even if from Luxembourg is a milder judgment, is the cause for the ECB not yet over.
The Federal Constitutional Court has in fact a kind of last word reserved, should the ECJ judge the concerns of Karlsruhe not sufficiently address.
explosives for European Law
“Threatening Now chaos? “, therefore does not only ask the Commerzbank economist Michael Schubert. . The Karlsruhe judges could ask the federal government to renegotiate the EU treaties, in extreme cases
But there was also criticism of this view, as Schubert: “The European law would be blown up if all national constitutional courts reserved the final right to interpret. ” When the judges will deal with the ECJ ruling is, is still not certain.
Agreement among financial experts that the ECJ decision, the ongoing large government bond purchase program of the ECB is unlikely to overturn. “Despite the renewed increase in uncertainty about the legality of the OMT current asset purchase program of the ECB is not affected”, such as Bankhaus Metzler. The monetary character of the QE program is much clearer in the eyes of critics
Only:. Presented QE alone off to a panic in the event of Grexits to prevent? As ECB President, the broad-based bond purchases announced earlier this year, he explicitly referred to the fact that the OMT progam valid stay and constitutes an additional option when needed. It would be the maybe most important crisis manager Europe is certainly more comfortable if he could continue to say that.
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