GERMANY’S constitutional court has challenged the European Central Bank to prove its vast purchasing of government debt is “proportionate” or face the Bundesbank being blocked from participating in the programme.
The Karlsruhe-based court ruled the ECB’s bond-buying efforts to stabilise the Eurozone legal, however expressed concerns that plans partly violate the German constitution. The court argued there is not enough political oversight in the purchases being made by the Frankfurt-based central bank. The German government and parliament have now been ordered to carry out assessments to ensure the asset purchases’ “economic and fiscal policy effects” do not outweigh the monetary policy objectives.
In a decision published online, the court said it “not find a violation of the prohibition of monetary financing of member state budgets”.
It added: “The decision published today does not concern any financial assistance measures taken by the European Union or the ECB in the context of the current coronavirus crisis.”
Ahead of the judgement, there were fears a ruling against the ECB could have triggered a serious Eurozone crisis.
The ECB has bought more than £1.9 trillion (€2.2 trillion) of public sector debt since launching its quantitive easing programme in 2014.
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