Germany’s highest court ruled this morning that a legal challenge against the European Central Bank’s (ECB) key tool to fight the euro zone’s financial crisis – Outright Monetary Transactions (OMT) – is not valid if the ECB restricts the use of the OMT programme.
Under this programme, the ECB can act as a lender of last resort to troubled Eurozone economies and share up their governments.
According to the German court, the set conditions are in accordance with the conditions laid down by the European Court of Justice (ECJ) in its own ruling on the issue. OMT is legal if the ECB does not announce which bonds it will buy, limits the volume of purchases, allows a minimum period between the issuance of the bonds and their purchase, and only buys bonds from states which have market access and whose bonds are held to maturity.
AECR member Professor Joachim Starbatty is one of the plaintiffs in this important lawsuit. He said:
I am disappointed by the court’s decision because it has considerably softened budget constraints of Eurozone governments. Also, by accepting the ECJ’s ruling as supreme, it has made itself obsolete. Once again, power is shifted from national institutions to the EU level.