Germany’s top court rejects complaint against ECB's bond buying scheme

Case for ECB action will be stronger if inflation trends persist - Makhlouf
Case for ECB action will be stronger if inflation trends persist - Makhlouf   -   Copyright  Thomson Reuters 2021   -  
By Reuters

<p><body> <p><span class="caps">BERLIN</span> (Reuters) -Germany’s constitutional court on Tuesday rejected a complaint against the European Central Bank’s flagship bond-buying scheme, in a ruling that primes the euro zone economy for more stimulus once the bank’s pandemic-related emergency measures end.</p> <p>The Karlsruhe judges said the bank had demonstrated that the 2.4 trillion euro ($2.9 trillion) Public Sector Purchase Programme (<span class="caps">PSPP</span>), launched in 2015 to fight off deflation, was appropriate.</p> <p>“Slowly but surely, Karlsruhe is losing its role of lender of last resort for German euro critics,” <span class="caps">ING</span> economist Carsten Brzeski said of Tuesday’s ruling, which was welcomed by the finance ministry in Berlin.</p> <p>One of the sponsors of the complaint against the <span class="caps">PSPP</span> was Peter Gauweiler, a former member of the governing <span class="caps">CSU</span> party and one of a handful of prominent and long-standing German critics of the <span class="caps">ECB</span>’s money-printing quantitative easing programmes.</p> <p>They have argued the <span class="caps">ECB</span> schemes jeopardise German taxpayers’ money and break a ban, enshrined in EU treaties, on the central bank financing governments.</p> <p>Last May, the court ruled that lawmakers had failed to exercise sufficient control over the Bundesbank, which buys bonds on behalf of the <span class="caps">ECB</span>, and ordered Germany’s central bank to quit the scheme unless the <span class="caps">ECB</span> provided proof that it was necessary and appropriate.</p> <p>Since that ruling, the <span class="caps">ECB</span> has provided a series of documents to the German government and parliament, which accepted its arguments.</p> <p>“The applications are … unfounded given that the Federal Government and the Bundestag substantially addressed and appraised the monetary policy decisions taken by the <span class="caps">ECB</span> … including the proportionality assessment,” the court said in a statement on Tuesday. </p> <p>Gauweiler’s co-sponsor was Bernd Lucke, a founder of the right-wing Alternative for Germany party.</p> <p>Another German <span class="caps">ECB</span> critic, Berlin finance professor Markus Kerber, has brought a separate complaint against the <span class="caps">ECB</span>’s Pandemic Emergency Purchase Program (<span class="caps">PEPP</span>), saying the 1.85 trillion euro scheme launched last year in response to the outbreak broke a ban on financing governments.</p> <p>That case is still pending and a ruling may take two years. The <span class="caps">ECB</span> has said it would buy new bonds under <span class="caps">PEPP</span> until March 2022 at the earliest and reinvest proceeds from maturing paper until at least the end of 2023.</p> <p>($1 = 0.8187 euros)</p> <p> (Reporting by Riham Alkousaa and Michael Nienaber; Writing by Francesco Canepa; Editing by Catherine Evans and John Stonestreet)</p> </body></p>