La European Court of Justice promotes the ECB, declaring the OMT program launched by the Eurotower in 2012 compatible with EU law. "The program to purchase government bonds on the secondary market does not go beyond the powers of the ECB".
The English acronym stands for “Outright monetary transactions” (outright monetary transactions) and refers to the anti-spread shield created by the European Central Bank to defeat the speculative attack launched by some large international investors against the euro starting from the second half of 2011.
The measure provides for unlimited purchases of government bonds to control the differentials of countries that have ended up in the sights of the markets. So far the OMTs have never been put into practice: three and a half years ago the announcement effect was enough to block speculation against the euro.
Last year the German Constitutional Court had declared the OMT non-compliant with German law, but the judges of Karlsruhe had then referred the case – for the first time in the history of the institution – to the European Court of Justice. Basically, Germany had asked to establish whether the anti-spread shield, instead of being a monetary policy measure, did not rather constitute an economic policy measure, or rather a type of intervention that falls outside the powers of the ECB.
According to the applicants, “the OMT programme, on the one hand, does not fall within the mandate of the ECB and violates the prohibition of monetary financing of the member states of the euro area and, on the other hand, violates the principle of democracy enshrined in the German Basic Law (Grundgesetz ) and thus undermines the German constitutional identity”.
But "the Court replies that the EU Treaties authorize the European System of Central Banks (ESCB) to adopt a program such as the OMT programme, and notes that the OMT, in the light of its objectives and the means envisaged for achieving them, falls within in monetary policy and therefore in the attributions of the Sebc. Finally, by aiming to preserve an adequate transmission of monetary policy, the aforementioned program is, at the same time, suitable to preserve the uniqueness of this policy and to contribute to the main objective of the latter, which is the maintenance of price stability ”.
The pronouncement of the Community judges, in any case, does not definitively close the match between Karlsruhe and the ECB, in which a new front has recently opened up. At the beginning of June, in fact, three individuals presented a new appeal to the German Constitutional Court against the policy of the European Central Bank: this time in the crosshairs there is quantitative easing launched in March by Eurotower. According to the appellants, the public and private bond purchase program wanted by Mario Draghi's board would be "scandalously worse" than the OMTs.
Not only that: in the 120 pages of the appeal we also read that the ECB has gone into a political territory that does not belong to it, "for which it has not received any mandate", nor any resolution from the German Parliament, the Bundestag or the Bundesbank. Furthermore, it is possible that the discussion at the Constitutional Court of Karlsruhe on Qe cannot be scheduled before 2016, when the plan will already be well into its implementation (the deadline, for now, is set for September 2016).
How will OMT work? All about the ECB's spread-saving plan
Quantitative easing, everything you need to know
