Sunday

11th Jun 2023

German top court 'not interested' in saving euro

  • The Constitutional Court is expected to deliver its verdict in autumn (Photo: Al Fed)

The German Constitutional Court is not interested whether the European Central Bank's (ECB) actions in the euro-crisis were successful, but whether they were legal, the court's top judge said on Tuesday (11 June) in a public hearing.

"Otherwise the end alone would justify the means," Andreas Vosskuhle, the presiding judge, noted.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

In the run-up to the hearing, ECB chief Mario Draghi had called his bank's bond-buying programme "the most successful monetary policy undertaken in recent time."

It recently bought some €1.1 billion of troubled bonds, helping Italy and Spain to keep their heads above the water.

The plaintiffs - a group which has so far challenged almost every euro-rescue step taken by Germany - also asked the Karlsruhe-based court to look at the ECB's Outright Monetary Transactions (OMT) scheme.

Under the OMT, the bank is to buy "unlimited" bonds from troubled euro-countries, provided they sign up to strict reforms.

In this respect, the programme is different to the other bond-buying scheme, which comes with no strings attached on reform.

OMT has never been activated.

But it's very announcement in August last year helped calm markets and also lowered borrowing costs in Italy and Spain.

The plaintiffs, backed by the Bundesbank - the German central bank - say it would burden the German taxpayer with undemocratic, non-transparent financial risks to the tune of several billion euros and that it is therefore unconstitutional.

The plaintiffs also say the scheme is illegal under EU law, because the ECB is not allowed to fund governments directly.

The German court has no clear jurisdiction over the ECB, with judges still making up their minds if they can actually rule on this case or not.

Another option is to refer the case to the European Court of Justice in Luxembourg or to rule only on those parts of the complaint that affect the German legal system.

Judges on Tuesday quizzed ECB board member Joerg Asmussen for over one hour, with questions on: Who is to decide how many bonds are to be bought? What is the "acceptable" price? Would the ECB also lose money on bonds if a country goes through a Greek-type debt restructuring?

Asmussen said the exact rules of the OMT scheme are "ready to be published within days."

He predicted there would be no other debt restructurings as in Greece.

He also said ECB would only buy bonds with a maturity of up to three years, imposing a time limit on the anti-crisis programme.

"The ECB and its decision-makers are aware of the limits of its monetary policy mandate. Our measures are aimed at ... preventing an unwanted break-up of the euro. It is not allowed to, is not able to and does not want to replace the actions of democratically elected governments," Asmussen noted.

His former university colleague, Jens Weidmann, now head of the Bundesbank, disagreed.

Weidmann was the only one to vote against the OMT scheme last year, when the ECB board first announced it.

"I see considerable problems with the bond-buying programmes and other measures of the euro-system, which blur the line between European monetary policy and financial policies of individual member states," Weidmann told the court.

Despite their policy differences, Asmussen and Weidmann sat next to each other in court and the presiding judge even mixed up who is who at one point.

The hearing continues on Wednesday, but a verdict is not expected before autumn.

Germany's top court hosts ECB showdown

The German Constitutional Court is on Tuesday to hear from opposing camps about the legality of ECB bond-buying and other anti-crisis measures.

German top court to rule on whether ECB can buy bonds

Germany's constitutional court is expected to rule this spring on the legality of the European Central Bank's bond purchases, a scheme that has eased the eurozone crisis by calming markets.

Final push for EU-Mercosur deal, amid deforestation fears

Finalising the EU-Mercosur agreement is a priority for the EU and the upcoming Spanish EU council presidency, ahead of the summit with Latin America and the Caribbean countries to be held in Brussels on 17 and 18 July.

Opinion

The 'BlackRock exemption' has no place in the EU's due diligence directive

With the EU's Corporate Sustainability Due Diligence Directive, there's an opportunity to harness the power of investment for truly sustainable activities. But to do this, it must not allow the 'BlackRock exemption' and instead cover institutional investors and asset managers.

Final push for EU-Mercosur deal, amid deforestation fears

Finalising the EU-Mercosur agreement is a priority for the EU and the upcoming Spanish EU council presidency, ahead of the summit with Latin America and the Caribbean countries to be held in Brussels on 17 and 18 July.

Latest News

  1. Negotiations on asylum reform to start next week, says MEP
  2. EU gig workers compromise dubbed ‘a disaster for workers’
  3. EU's one-off chance to influence Laos taking over ASEAN chair
  4. Belgian bâtonnier on Russia: 'You can have a client you don't like'
  5. EU's proposed ethics body 'toothless', say campaigners
  6. Study: 90% of Spanish inflation 'driven by corporate profits'
  7. If Spanish economy is doing well, why is Sanchez poised to lose?
  8. EU lawyers for Russia: making 'good' money?

Stakeholders' Highlights

  1. Nordic Council of Ministers20 June: Launch of the new Nordic Nutrition Recommendations
  2. International Sustainable Finance CentreJoin CEE Sustainable Finance Summit, 15 – 19 May 2023, high-level event for finance & business
  3. ICLEISeven actionable measures to make food procurement in Europe more sustainable
  4. World BankWorld Bank Report Highlights Role of Human Development for a Successful Green Transition in Europe
  5. Nordic Council of MinistersNordic summit to step up the fight against food loss and waste
  6. Nordic Council of MinistersThink-tank: Strengthen co-operation around tech giants’ influence in the Nordics

Stakeholders' Highlights

  1. EFBWWEFBWW calls for the EC to stop exploitation in subcontracting chains
  2. InformaConnecting Expert Industry-Leaders, Top Suppliers, and Inquiring Buyers all in one space - visit Battery Show Europe.
  3. EFBWWEFBWW and FIEC do not agree to any exemptions to mandatory prior notifications in construction
  4. Nordic Council of MinistersNordic and Baltic ways to prevent gender-based violence
  5. Nordic Council of MinistersCSW67: Economic gender equality now! Nordic ways to close the pension gap
  6. Nordic Council of MinistersCSW67: Pushing back the push-back - Nordic solutions to online gender-based violence

Join EUobserver

Support quality EU news

Join us