7 Feb 2014
German Court passes OMT decision to ECJ
FXStreet (London) - The German Constitutional Court (Bundesverfassungsgericht) this morning ruled that it would be passing its decision on the European Central Bank’s open market transaction programme to the European Court of Justice.
In a statement accompanying the decision, the court stated that the central bank’s bond-buying plan “exceeds the European Central Bank's monetary policy mandate and thus infringes the powers of the member states, and that it violates the prohibition of monetary financing of the budget.”
However, the court stated that if the OMT decision was applied restrictively, it could still conform to German constitutionality.
The court suggested that OMT would be legal if it would not undermine the conditionality of the EFSF and ESM bailout programmes. This would exclude the haircut option from the European Stability Mechanism treaty as well as any unlimited programmes, ruling out ECB president Mario Draghi’s “whatever it takes” stance on Euro stability.
In a statement accompanying the decision, the court stated that the central bank’s bond-buying plan “exceeds the European Central Bank's monetary policy mandate and thus infringes the powers of the member states, and that it violates the prohibition of monetary financing of the budget.”
However, the court stated that if the OMT decision was applied restrictively, it could still conform to German constitutionality.
The court suggested that OMT would be legal if it would not undermine the conditionality of the EFSF and ESM bailout programmes. This would exclude the haircut option from the European Stability Mechanism treaty as well as any unlimited programmes, ruling out ECB president Mario Draghi’s “whatever it takes” stance on Euro stability.