German court says some aspects of ECB bond buying programme are 'constitutional'
By Alexander Bueso
Date: Tuesday 05 May 2020
(Sharecast News) - Germany's top Constitutional Court called into question the "proportionality" of the European Central Bank's main bond purchase programme, but did not call into question the basic outline of the monetary authority's strategy.
Some observers said that it stopped short of scuttling the Public Sector Purchase Programme (PSPP), but according to Claus Vistesen at Pantheon Macroeconomics, the ECB's legal experts would need "to muster all their creativity to come up with a response to satisfy the German Constitutional Court, and they need to work fast."
In its findings, released at 0925 GMT, the German Tribunal said that the European Court of Justice's approach disregarded the "actual effects" of the PSPP and that by not carrying out the necessary overall assessment its review of whether the Eurosystem was staying within its monetary policy mandate had fallen short.
The German jurists therefore called on the ECB to conduct that review and said the country's central bank, the Bundesbank, should ensure that the bonds held in its portfolio are sold as part of a "possibly long-term" strategy coordinated with the Eurosystem.
But again, in overall terms, market commentary was that the decision did not call into question the ECB's basic strategy.
Furthermore, the jurists said their ruling did not have a bearing on the ECB's Pandemic Emergency Purchase Programme.
Along apparently similar lines, Vistesen added: "Our gut tells us that this will blow over, eventually, though we sympathise deeply with the ECB's legal experts at this point in time."
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