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Afp

Top German judges reopen ECB bond-buying case

By AFP
media Germany's Federal Constitutional Court will hear arguments for and against the ECB and determine whether they have violated monetary financing policies next montyh dpa/AFP

Germany's highest court will hold public hearings at the end of July in a case targeting the European Central Bank's 2.6-trillion-euro ($3.0 trillion) bond-buying scheme which EU judges have already cleared.

The Federal Constitutional Court in Karlsruhe will hear the case for two days on July 30 and 31, it said in a statement Tuesday.

At stake is a programme the ECB and many observers credit with buoying growth and jobs in the struggling eurozone economy since 2015 but which critics say stretched the central bank's mandate too far.

German judges referred the case to the European Court of Justice in 2017 but their EU colleagues judged that the ECB's so-called "quantitative easing" programme was in line with EU treaties in December last year.

ECB president Mario Draghi confirmed the end of net purchases of government and corporate bonds that same month.

But the institution continues to reinvest the proceeds as the bonds it holds mature.

In the constitutional case, German politicians and academics argue that the ECB has violated rules against "monetary financing", or the central bank funding state spending by in effect printing money.

That would overstep its mandate which constrains the Frankfurt-based bank to maintaining "price stability" or a steady but low level of inflation.

If the German judges find in favour of the plaintiffs, the Bundesbank -- Germany's national central bank -- could be legally prevented from taking part in the QE scheme.

That could pose problems for the ECB in future, as Draghi last week raised the possibility of reactivating the quantitative easing programme if the eurozone's sluggish economy does not pick up in the coming months.

There was "considerable headroom" to re-launch QE, he said at a central banking conference in Sintra, Portugal.

It is not the first time German single currency sceptics have enlisted the constitutional court against the ECB.

In 2016, judges rejected complaints against the central bank's controversial "outright monetary transactions" (OMT) programme, which helped stabilise the eurozone during the 2012 sovereign debt crisis even though it was not actually used.

OMT allows the ECB it to buy unlimited amounts of sovereign bonds in exchange for economic reforms by crisis-stricken governments.

 
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