The European Central Bank’s (ECB) bond buying program meant to calm the crisis in the currency block was labelled problematic by the Federal Constitutional Court of Germany and sent to the European Court of Justice. This move has been embraced by the EU Commission and analytics agree that it might be in fact beneficial for the euro. If rejected by the Constitutional Court, the ECB would lose its key instrument and risk triggering pressures again as the bailed-out eurozone countries make attempts to return to the debt markets.
As early as in September 2012, the Constitutional Court had nullified a few legal problems to the key eurozone crisis tools – the European fiscal pact and the European Stability Mechanism (ESM). Yet, eurosceptics filed a last-minute dispute to the ECB’s bond purchase program reasoning that it infringed on the mandate of the central bank and was equivalent to printing cash to help countries out of their debts.
The Outright Monetary Transactions program (OMT), under which the central bank can in theory purchase an unlimited amount of sovereign debt of indebted countries, was introduced by ECB boss, Mario Draghi, in August two years ago. Although it has not been used since, its very existence has been the most effective tool against the crisis by mitigating fears that the eurozone would fall apart.
Germany’s highest court, based in Karlsruhe, said it would give its final ruling on March 18 but it also decided to consult the European Court of Justice with regard to the OMT. In the opinion of the court, there are important reasons to claim that it goes beyond the ECB’s monetary policy mandate, that it overstepped the rights of the EU member states, and contradicts the interdiction of monetary deficit financing. Nonetheless, the court said it believed it was possible that reservations could be applied to the OMT program in the way that would make it in line with acquis communautaire (accumulated legislation of the EU).
