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German court rules in favour of ECB crisis-fighting tool

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German court rules in favour of ECB crisis-fighting tool
The European Central Bank building in Frankfurt. Photo: DPA.
08:46 CEST+02:00
UPDATE: Germany's top court ruled on Tuesday that a key crisis-fighting tool of the European Central Bank complies with German national law.

The constitutional court ruled that the ECB's 2012 bond-buying plan called Outright Monetary Transactions (OMT) complies with German law.

OMT - though never actually used - was part of ECB's President Mario Draghi's landmark promise to do "whatever it takes" to save the battered euro at the height of the crisis in 2012.

That vow, backed by the announcement of the OMT programme, helped reduce borrowing costs for the most debt-hit countries, calmed markets and brought the eurozone back from the brink.

The promise of OMT was that the ECB could, if necessary, buy up unlimited amounts of government bonds from debt-stricken countries that had pledged reforms such as Italy, Spain and Portugal.

Activists however had charged that the ECB overstepped its remit - technically as the bloc's guardian of price stability - and assumed an economic policy role reserved for elected governments.

More cases pending

Few observers expected the Constitutional Court in Karlsruhe to torpedo the ECB's programme.

In January 2014, it had voiced concerns about OMT but then kicked the case up to the European Court of Justice in Luxembourg.

The EU's highest court has since essentially backed OMT, arguing that while the ECB's chief purpose is indeed price stability, it may also support EU economic policy goals.

But more cases are also pending - including against the ECB decision to broaden bond purchases from only sovereign to corporate bonds.

That move is part of the ECB's massive quantitative easing or QE stimulus programme that aims to boost inflation and growth.

Critics charge that the ECB is essentially printing money and lavishing it on states and companies, leaving taxpayers with the risk of one day having to foot the bill.

The ECB has already dropped rates to near zero and saturated the eurozone with more than €1 trillion ($1.1 trillion).

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