The European Central Bank (ECB) may support euro countries with acute financing problems through government bond purchases in an emergency with German participation. The Federal Constitutional Court has spoken a highly anticipated ruling this Tuesday and rejected several lawsuits against the so-called OMT program. The judges ruled that because of limiting conditions by the European Court of Justice (ECJ) is not contrary to the prohibition on monetary state financing (click here for the original text).
Author: Alexander Armbruster, editor in business.
Germany’s top lawman had negotiated in 2013 after several constitutional complaints about the OMT announcement of the ECB. In January 2014, it presented in a decision states that the Central Bank had exceeded its powers, because they reach into the economic policy responsibilities of Member States.
The European Court, which the judges further submitted the questions for examination, came to another estimate: After its judgment of June 2015, the ECB has a wide discretionary margin and can make a legally compliant the OMT program
in February this year was then again an oral day of the trial in Karlsruhe.. Constitutional Court President Andreas Voßkuhle pointed then to know that his judgment the ECJ not diametrically contradict, but will be probably largely join him. He said at the time that the European Court has taken the concerns of his judgment significantly. Now he said during the sentencing: “The European legal community has been strengthened by this process produced.”
Governing Director Yves Mersch and Financial Secretary Jens Spahn presented during the hearing day in February again the program boundaries out. Mersch said that the purchase volume is limited because the central bank purchases of only debt securities in the short-term segment and this amount inevitably finally was natural. Spahn project aimed that the OMT program an auxiliary and reform program of the euro bailout fund ESM was needed about the decide the Bundestag.
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the plaintiffs, which include, for example, the former CSU parliamentarian Peter Gauweiler, presented exactly these limitations into question and expressed the view that the program basically bein hold unlimited purchases. Bundesbank President Jens Weidmann, who testified at the time for the second time in this process, explained his reservations remained. “The risks are divided according to the ECB’s capital quotas to the individual national central banks and thus to the taxpayer.”
He also criticized the fact that there would be a mix of monetary and fiscal policies of the finance minister. Financial Secretary Spahn said in turn that potential losses to banks accounted for and the Bundesbank profit represents only a very small part of the German budget.
As surprisingly clearly felt during the February hearing of the Constitutional Court judge Peter Müller, the statement of the ECB’s Director Mersch: “a monetary union is a community of liability.” This is of been disarming clarity.
Mersch and Weidmann both said they thought it is currently unlikely that the program could actually be activated. Weidmann also stressed that even the announcement of the program have a strong effect on the behavior of financial market participants. This is also a key point of criticism of the applicant
The Berlin teaching economist Henrik Enderlein interpreted the statements of the ECB’s representative at the time of the short message service Twitter so. “So (…) was OMT a bluff, but legal , Activation unlikely limited volume, no big deal. “Shortly before the verdict tweeted Enderlein that the OMT program but in fact provides” dead “, as that is currently difficult to imagine that a country under an ESM program simultaneously bonds to could move the markets and OMT purchases would be really necessary.
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