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

Economy May 18, 2021 05:26AM ET
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© Reuters. FILE PHOTO: A man wearing a protective mask walks past the European Central Bank (ECB) during sunset as the spread of the coronavirus disease (COVID-19) continues in Frankfurt, Germany, April 18, 2021. REUTERS/Kai Pfaffenbach

BERLIN (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.

The Karlsruhe judges said the bank had demonstrated that the 2.4 trillion euro ($2.9 trillion) Public Sector Purchase Programme (PSPP), launched in 2015 to fight off deflation, was appropriate.

"Slowly but surely, Karlsruhe is losing its role of lender of last resort for German euro critics," ING economist Carsten Brzeski said of Tuesday's ruling, which was welcomed by the finance ministry in Berlin.

One of the sponsors of the complaint against the PSPP was Peter Gauweiler, a former member of the governing CSU party and one of a handful of prominent and long-standing German critics of the ECB's money-printing quantitative easing programmes.

They have argued the ECB schemes jeopardise German taxpayers' money and break a ban, enshrined in EU treaties, on the central bank financing governments.

Last May, the court ruled that lawmakers had failed to exercise sufficient control over the Bundesbank, which buys bonds on behalf of the ECB, and ordered Germany's central bank to quit the scheme unless the ECB provided proof that it was necessary and appropriate.

Since that ruling, the ECB has provided a series of documents to the German government and parliament, which accepted its arguments.

"The applications are ... unfounded given that the Federal Government and the Bundestag substantially addressed and appraised the monetary policy decisions taken by the ECB ... including the proportionality assessment," the court said in a statement on Tuesday.

Gauweiler's co-sponsor was Bernd Lucke, a founder of the right-wing Alternative for Germany party.

Another German ECB critic, Berlin finance professor Markus Kerber, has brought a separate complaint against the ECB's Pandemic Emergency Purchase Program (PEPP), saying the 1.85 trillion euro scheme launched last year in response to the outbreak broke a ban on financing governments.

That case is still pending and a ruling may take two years. The ECB has said it would buy new bonds under PEPP until March 2022 at the earliest and reinvest proceeds from maturing paper until at least the end of 2023.

($1 = 0.8187 euros)

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

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