| schema:articleBody
| - Germany's top court on Tuesday demanded clarification of a key element of the European Central Bank's support to the eurozone economy, but stopped short of overturning its 2.6-trillion-euro "quantitative easing" (QE) bond-buying scheme altogether. Germany's Bundesbank central bank will be barred from participating in QE in three months' time unless the ECB "demonstrates in a comprehensible and substantiated manner that the monetary policy objectives pursued by the ECB are not disproportionate," the Constitutional Court (BVG) in Karlsruhe said in a landmark ruling. The court also raised an unprecedented challenge to the Court of Justice of the European Union (CJEU), labelling its earlier ruling rubber-stamping the QE scheme "not comprehensible" and declaring it not legally binding. But presiding judge Andreas Vosskuhle went out of his way to note that the ECB's new 750-billion-euro ($813 billion) "Pandemic Emergency Purchase Programme" (PEPP) launched specifically to fight the impact of the coronavirus was not directly affected by the decision. "I think the ECB can meet these demands," Volker Wieland, a member of the Council of Economic Experts that advises the German government, told public broadcaster Phoenix immediately after the ruling, saying judges had left a "definitely passable exit". For its part, the ECB said that it is "analysing the ruling and will comment in due course". Beyond Frankfurt, the decision "will have consequences in the whole EU legal system, because in future other member states will be able to ignore CJEU decisions they don't like," Wieland said. He highlighted nations like Hungary and Poland whose reforms to the political and judicial systems have drawn allegations they are undermining democracy. The Constitutional Court was "calling the authority of the CJEU into question precisely when autocratic governments try to defeat the primacy of EU law," law professor Matthias Goldmann of Frankfurt's Goethe University posted on Twitter, calling the ruling "dangerous". Tuesday's ruling turned on the idea of whether the ECB's bond-buying programme meets a test of "proportionality" to its central objective of price stability. By buying up government bonds, QE is designed to drive private investors' cash into riskier investments, stoking economic growth and in turn powering inflation towards the ECB's goal of just below two percent. But the policy also has distributional effects, the BVG noted, potentially impacting "public debt, personal savings, pension and retirement schemes, real estate prices and the keeping afloat of economically unviable companies". The CJEU found that such supposed side effects were acceptable in the pursuit of the ECB's overarching objective, accepting the central bank's judgement on what interventions are necessary in pursuit of its goal. By contrast, the German judges argued that the European court's ruling "allows asset purchases even in cases where the purported monetary policy objective is possibly only invoked to disguise what essentially constitutes an economic and fiscal policy agenda", such as lowering borrowing costs for individual euro member states. Such a legal interpretation would effectively transfer competences over economic and fiscal policy from the national to the European level, the judges added. By ruling in favour of something not permitted without change to the EU's founding treaty, the CJEU had made its judgement "ultra vires" or outside the law, they said. Tuesday's BVG ruling "goes nuclear", Lucas Guttenberg of the Jacques Delors Centre think-tank in Berlin posted on Twitter. Following the judges' reasoning on limiting side effects, "issuer limits and capital key are essential" in ECB bond-buying schemes, Guttenberg reasoned. Those two boundaries restrict how much debt from any one government the ECB, and mean purchases must be in line with states' share in the central bank's capital. Such restrictions threatened to put the brakes on the ECB's support to the eurozone economy before the coronavirus struck, and were dropped in the design of the crisis-fighting PEPP scheme. Ahead of Tuesday's judgement, Berenberg bank economist Holger Schmieding warned that such tightening of the screws on the ECB "could make it more difficult for the bank to use this part of its monetary toolkit flexibly and efficiently"." cax-tgb/mfp/jh
|
![[RDF Data]](/fct/images/sw-rdf-blue.png)
![[cxml]](/fct/images/cxml_doc.png)
![[csv]](/fct/images/csv_doc.png)
![[text]](/fct/images/ntriples_doc.png)
![[turtle]](/fct/images/n3turtle_doc.png)
![[ld+json]](/fct/images/jsonld_doc.png)
![[rdf+json]](/fct/images/json_doc.png)
![[rdf+xml]](/fct/images/xml_doc.png)
![[atom+xml]](/fct/images/atom_doc.png)
![[html]](/fct/images/html_doc.png)