The decision of the German constitutional court concerning the lawsuit against ECB QE program is a false compromise. The constitutional court signals that it considers the ECB QE program as a violation of European law and to constitute monetary financing. Yet the constitutional court is not willing to take a decision itself at this stage, but rather asks the European court of justice (ECJ) for “advice”.
I expect that the ECJ will again support the ECB, as it did with the ECB’s OMT program, but there is no guarantee the German constitutional court will heed this advice. The new lawsuits against the ECB QE program have even fewer merits than the past lawsuits against the OMT program. The wise and right decision by the German constitutional court would have been to reject the lawsuits against the ECB.
The purchase of government bonds is a not unusual monetary policy instrument in times of crisis in order to lower interest rates and to be able to meet the price stability mandate. The ECB did not act in an unusual fashion but simply did what most western central banks did during the past 10 years. My concern is that these lawsuits against the ECB and also the past OMT lawsuit at the constitutional court could damage the credibility of the ECB in Germany.