Currency and Financial Markets Europe

Temporary End of the OMT Programme

The German Constitutional Court today declared that the OMT programme of the European Central Bank (ECB) constitutes a violation of European law, and asked the European Court of Justice to confirm its ruling. The curiosity is that the German Constitutional Court has no mandate to issue such a ruling on European law, as stressed by the two dissenting judges.

The ruling implies a temporary end to the OMT programme, as it would be highly controversial for the ECB to implement such a programme amid a pending court case.

The ruling is creating a high degree of uncertainty about the general ability of the ECB to act. The objections of the Court apply to almost all measures of the ECB, and thus raise the possibility that the ECB will be challenged repeatedly about its actions in the future. However, in light of the peaceful situation in the sovereign debt markets, and also through the many available tools, the ECB should be able to ensure market stability in the coming months.

The European Court of Justice must now quickly make a decision, so that the uncertainty is resolved, and the ECB can regain its full capacity to act.

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