Karlsruhe says no
Desperate times call for desperate measures. The European Central Bank thought so too: back in the middle of the euro crisis when Mario Draghi made his “whatever it takes” promise; and later, when the ECB announced the large public sector purchase programme (PSPP). In the Corona crisis, the ECB has gone a step further and decided on another purchase programme (PEPP) worth € 750 billion.
These programmes have never been without controversy, especially in Germany. Yesterday, Germany’s constitutional court gave its verdict on the PSPP programme. It was an historical ruling. Karlsruhe rejected both the ECB decision to set up the PSPP programme and the judgement of the European Court of Justice (CJEU) that waved it through, as patently ultra vires. The conflict between Karlsruhe and Luxembourg could not be more obvious.
Karlsruhe is nevertheless looking for a way out. If the ECB provides convincing evidence that its purchase programme is proportionate, the Bundesbank can continue to participate. This means the ECB probably still has power to act - for now. In the medium term, however, the German constitutional court has set in motion a necessary if difficult legal test of the limits of the ECB’s independence. A test which the CJEU has so far managed to dodge. It cannot afford to do that any longer.
Bert Van Roosebeke, cep-Division Head, Financial Markets
Here cep provides information in figures and graphs that are updated on a daily basis.
Bert Van Roosebeke
Head of Division Financial Markets
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