Top German court demands ECB to clarify bond-buying scheme

Germany’s Constitutional Court ruled on Tuesday that the European Central Bank must clarify a key bond-buying scheme to support the eurozone economy is “proportionate” or else Germany’s central bank may no longer participate, news wires reported.

The Bundesbank will be barred from participating in the “quantitative easing” (QE) asset purchase programme in three months’ time “unless the ECB Governing Council adopts a new decision that demonstrates in a comprehensible and substantiated manner that the monetary policy objectives pursued by the ECB are not disproportionate,” the court said in a statement.

The ECB has bought more than 2.6 trillion euros ($2.9 trillion) in corporate and government bonds in an attempt to raise inflation and weak economic growth in the 19 countries that use the euro. The programme faced objections from conservative German academics that it exceeds the bank’s authority and violates a legal ban in the EU treaty on financing governments. The court found that the ECB did not violate a ban on central banks financing government spending.

The bank has more recently announced 750 billion euros in new purchases to cushion the blow from the virus outbreak. Tuesday’s court decision did not apply to that new programme, but analysts have been keeping an eye on the court case in case it calls into question the ECB’s ability to intervene in markets to support the economy.

Similar articles