• Germany's news in English
German court to probe ECB bond-buying
Germany's Constitutional Court is expected to find a compromise. Photo: Tobias Helfrich/Wikimedia Commons

German court to probe ECB bond-buying

AFP/The Local · 14 Feb 2016, 09:04

Published: 14 Feb 2016 09:04 GMT+01:00

Facebook Twitter Google+ reddit
The case begins at a time when the bank is preparing to further ramp up its bond purchase programme.
The OMT -- or Outright Monetary Transactions -- programme was unveiled in 2012, at the height of the eurozone sovereign debt crisis, as the ECB's weapon to warn off investors from speculating on government bonds.
The programme was never implemented, and has since been superceded by a far bigger bond purchasing programme known as QE, although that is aimed now at kickstarting inflation rather than warding off speculation.
The German top court's ruling would focus on the now likely defunct measure but could have a bearing over the ECB's ongoing 1.1 trillion euro bond buying programme until March 2017.
For critics, such measures are effectively a way of printing money to pay off a government's debt.
Some 37,000 eurosceptics initially took their case against the OMT to Germany's highest court in 2014.
The constitutional court then partially agreed with their concerns, ruling that there are "important reasons to suggest that it goes beyond the ECB's monetary policy mandate and infringes on the powers of the member states and contravenes the ban on monetary deficit financing".
But it passed the case on to the European Court of Justice in Luxembourg before issuing its final ruling.
The ECJ however last June swiped aside the German court's misgivings, saying the scheme was compatible with EU law.
The court in Karlsruhe therefore now has to issue its final decision on the case, with a verdict not expected before a few months.
Debt-wary Germany is especially sceptical about such bond-purchasing programmes, and the head of the country's central bank Jens Weidmann had voted against both OMT and QE.
At the ECB's regular monetary policy meetings, Weidmann has also played a dissuading role when bank chief Mario Draghi made any suggestions of further ramping up the bond purchasing programme.
Commerzbank analyst Michael Schubert believes that the German court "will probably not change its previous ruling, even after" the ECJ's decision.
Story continues below…
Rather, German judges "will likely try to find a compromise", he predicted.  This could see the court accept the European court's conclusions while rejecting its reasoning, or simply reserving the right to reexamine the
situation in case of new developments, he said.
A group of renowned German economists including Clemens Fuest, who heads the Ifo institute, had warned that if the German court agrees with the ECJ, it would open the floodgates for other unconventional measures.
"From the moment that the ECB carries out an intervention in the crisis, we risk sending (the eurozone) in the wrong direction," they added, pointing out that debt-laden countries would lose the incentive to pursue meaningful reforms of their economies, and could simply wait for the ECB to rescue them.
At the ECB's first monetary policy setting meet this year, bank chief Mario Draghi hinted the bank could boost stimulus measures and further slash rates to give stubbornly low inflation a nudge.

For more news from Germany, join us on Facebook and Twitter.

AFP/The Local (news@thelocal.de)

Facebook Twitter Google+ reddit

Today's headlines
Outrage over ruling on 'brutal' gang rape of teen girl
The now convicted suspects, sitting in court in Hamburg. Photo: DPA.

A 14-year-old girl was gang-raped and left partially clothed and unconscious in freezing temperatures. Now prosecutors are appealing the sentences for the young men found guilty, most of whom will not set foot in jail.

Dozens of Turkish diplomats apply for asylum in Germany
Demonstrators holding a giant Turkish flag protest against the attempted coup in Istanbul in July. Photo: DPA.

Since the failed putsch attempt in Turkey in July, Germany has received 35 asylum applications from people with Turkish diplomatic passports, the Interior Ministry confirmed on Wednesday.

Hertha Berlin fan club criticised for 'anti-gay banner'
Hertha BSC beat FC Cologne 2-1. Photo: DPA

A 50 metre fan banner apparently mocking the idea of gay adoption has overshadowed Hertha BSC's win in the Bundesliga.

Germany stalls Chinese takeover of tech firm Aixtron
Aixtron headquarters in Herzogenrath. Photo: DPA

The German government on Monday said it had withdrawn approval for a Chinese firm to acquire Aixtron, a supplier to the semiconductor industry, amid growing unease over Chinese investment in German companies.

Politicians call for tough sentences for 'killer clowns'
File photo: DPA.

Now that the so-called 'killer clown' craze has spread from the US to Germany, elected officials are drawing a hard line against such "pranks", with some threatening offenders with jail time of up to a year.

Nearly one in ten Germans are severely disabled
Photo: DPA

New figures reveal that 9.3 percent of the German population last year were considered severely disabled.

The Local List
Germany's top 10 most surreal sites to visit
The Upside-Down House, in Mecklenburg–Western Pomerania. Photo: Olaf Meister / Wikimedia Commons

From upside-down houses on Baltic islands to a fairy-tale castle near the Austrian border, Germany is a treasure trove of the extraordinary.

Bavarian critics back Merkel for Chancellor again
Photo: DPA

The Christian Social Union (CSU) have long delayed backing Angela Merkel as their candidate for Chancellor in next year's general election. But now key leaders are supporting her publicly.

Four taken to hospital after hotel toilet bursts into flames
File photo: DPA.

Four guests at a Nuremberg hotel were taken to hospital due to smoke inhalation early Monday morning after a toilet there burst into flames.

Creepy clown scare spreads to Germany
Two of the clowns were apparently equipped with chainsaws. Photo: Pedro Pardo / AFP file picture

Police said Friday five incidents involving so-called scary clowns had occurred in two north German towns, including one assailant who hit a man with a baseball bat, amid fears that Halloween could spark a rash of similar attacks.

10 things you never knew about socialist East Germany
Sponsored Article
Last chance to vote absentee in the US elections
How Germans fell in love with America's favourite squash
How I ditched London for Berlin and became a published author
12 clever German idioms that'll make you sound like a pro
23 fascinating facts you never knew about Berlin
9 unmissable events to check out in Germany this October
10 things you never knew about German reunification
10 things you're sure to notice after an Oktoberfest visit
Germany's 10 most Instagram-able places
15 pics that prove Germany is absolutely enchanting in autumn
10 German films you have to watch before you die
6 things about Munich that’ll stay with you forever
10 pieces of German slang you'll never learn in class
Ouch! Naked swimmer hospitalized after angler hooks his penis
Six reasons why Berlin is now known as 'the failed city'
15 tell-tale signs you’ll never quite master German
7 American habits that make Germans very, very uncomfortable
Story of a fugitive cow who outwitted police for weeks before capture
Eleven famous Germans with surnames that'll make your sides split
The best ways to get a visa as an American in Germany
jobs available
Toytown Germany
Germany's English-speaking crowd