Quantitative easing by the European Central Bank is also legal in Germany. The Constitutional Court established it Germany according to which the securities buyback program launched by the Eurotower in 2015 complies with the country's federal laws. Despite this, the judges still have asked for further clarification, giving the ECB three months to demonstrate that the monetary objectives of the plan are not disproportionate "compared to the fiscal and economic policy effects deriving from the programme". The decision prompted a response from the EU Commission and the ECB itself, which will meet at 18pm today, Tuesday 5 May.
The decision was eagerly awaited by the European markets since an unfavorable ruling would have had the effect of excluding the Bundesbank from Quantitative Easing, but also of jeopardize the $750 billion pandemic purchase programme euro put in place by the Central Bank on 18 March in order to counter the negative impact of the coronavirus emergency on the Eurozone economy. Not by chance the continental stock exchanges reacted nervously to the news from Germany, showing a few minutes of uncertainty and then continuing on the path of rebound undertaken in the morning.
The Court expressed itself with seven votes in favor of Qe and one against. The sentence comes following numerous appeals presented in Germany by academics, entrepreneurs and economists according to which the Eurotower, with the Quantitative Easing, would have gone beyond its powers, encouraging the States not to follow a path of account consolidation knowing they can count on the ECB's lifesaver. In the operative part of the sentence, the judges rejected the thesis of the promoters, explaining that the "German Federal Court did not find a violation of the prohibition on monetary financing of states".
So all resolved? Not exactly. The Karlsruhe judges have partially accepted the appeals against the measures adopted since 2015 and stated that government bond purchase programs conflict with the powers of the ECB itself. It is the first time in history that the German Constitutional Court states that the measures taken by a European body "are not covered by European competences" and therefore "could not be valid in Germany".
For this reason, the Court has set strict conditions, failing which the Bundesbank will have to withdraw from the programs of the European Central Bank. First condition: Frankfurt will have to provide clarifications on the bond purchase program and on the proportionality of the interventions undertaken.
If these explanations do not arrive in time, the Bundesbank will no longer be able to "participate in the implementation and execution of the decisions in question of the ECB unless the Governing Council of the ECB adopts a new decision which precisely demonstrates the proportionality of its program", they established The Judges. "In the same terms - concludes the sentence - the Bundesbank must ensure that the bonds already purchased and held in its portfolio are sold on the basis of a strategy - possibly long-term - coordinated with the Eurosystem".
Finally, recommendations are also made to the German parliament and government, which will have to ensure that the ECB makes the required assessments. “This applies accordingly to reinvestments under the PSPP which started in January 2019 and resumed in November. In this respect, the federal government and parliament also have the task of continuing to monitor the Eurosystem's decisions on purchases of government bonds under the PSPP and to use the tools at their disposal to ensure that the ECB remains within its mandate. ”, the judges ruled.
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“We reaffirm the primacy of European law and the fact that the decisions of the European Court are binding on all national courts. The Commission respects the independence of the ECB, and we will study the ruling in detail”. Thus a spokesman for the EU Commission, late in the morning, commented on the sentence of the German Court on the purchases of ECB bonds.
The European Central Bank itself replies that it is evaluating the sentence of the German Court on the government bond purchase program "and will express its opinion in due course". This was announced by a Eurotower spokesman. Meanwhile, we learn that a meeting of the ECB is scheduled for 18 pm.
