Currency and Financial Markets ECB Europe Macroeconomics Monetary Policy

Statement on the Federal Constitutional Court’s decision regarding the European Central Bank’s OMT program

The German constitutional court took a wise decision, but which is effectively a reversal of its earlier decision of January 2014. The court now accepts the authority and the decision by the European Court of Justice on the ECB’s OMT program of 2015. The backing down of the German constitutional court is a smart move, as it would inevitably have lost the battle against the European Court of Justice on issues of European law. It is high time now for the German court to end its battle with the ECB. My biggest concern is that the attacks on the ECB in Germany damage the credibility of the ECB and ultimately also the euro area and German economies.
The decision ends the accusation that the OMT program, if it were ever applied, constitutes monetary financing. But the decision gives the German constitutional court still the option to intervene in European law in the future, if it feels national law is violated. The court’s call on the German government to monitor the ECB’s action more closely in the future does not affect in any way the options and instruments available to the ECB.

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