The German Constitutional Court promotes anti-crisis plan Omt ECB – Il Sole 24 Ore

The German Constitutional Court declared lawful the program to purchase bonds of countries in crisis (UNWTO) launched by the ECB in 2012 dismissing the appeal filed by a group of citizens and defusing a mine potential just two days after the British referendum on the EU. The green light given by the German constitutional judges makes it possible to not undermine confidence in the efficacy of markets to an intervention by the central bank in Frankfurt to quell the financial turmoil caused by a possible Brexit.

Against Qe ECB three appeals to the German Constitutional Court

At the Karlsruhe judges had addressed a group of politicians, citizens and associations “eurosceptic” who challenged the legitimacy of the program put in point implementation of the famous statement of Mario Draghi that the ECB would do “everything necessary” (whatever it takes) to defend the euro under attack for the debt crisis. The OMT (outright monetary transactions) were to allow the European Central Bank to buy unlimited extent of the crisis countries Securities who undertook an economic program agreed with the European partners. In fact it was never used because the only announcement of the plan helped to calm the markets.
In particular, the program, dubbed “shield antispread”, provides for the purchase by the ECB on the secondary market – without limits, in case of necessity – the countries whose bond spreads have risen beyond the danger level. To activate the program the country in crisis has to sign a memorandum with the Commission and the ECB committing to structural reforms and fiscal consolidation.

The European Court promotes plan to buy bonds the ECB

Those opposed to the OMT program in 2013 asked the German Constitutional Court of proncuniarsi lawfulness of the transaction and the judges in Karlsruhe postponed the matter the European Court of Justice. The latter’s task was to determine whether purchases of securities assumed by the WTO go beyond the statutory mandate of the ECB. The judges in Luxembourg have given the green light to the Dragons but the German Court had reserved the last word about the program. A word that would potentially could have repercussions on the current Quantitative easing initiated by the ECB, and more generally on the use of unconventional instruments from part of Frankfurt.

With the decision announced today the German Court says that the program is legitimate if it respects the limits clarified by the EU court ruling. In June 2015, the Luxembourg judges have determined that the program launched in September 2012 the ECB has sufficient safeguards in order to prevent a “disproportionate use” of the purchase of bonds that would result in a violation of EU rules on the institution Central.

The Karlsruhe Court, therefore, draws the limits set by the European Union and colleagues, noting that UNWTO does not violate the German Basic Law, remember that the Bundesbank may participate in any of OMT program only if they observe the conditions laid down by the EU Court. In particular: purchases will not be announced; their volume is limited from the outset; There is a minimum time between the issuance of government bonds and the purchase by the central bank system that is defined from the outset and prevent a distortion of the conditions of the issue; the Eurosystem buys only stocks that Member States have access to the market thereby allowing the financing of bond; purchased thiols are required only in exceptional cases to maturity; purchases are limited or interrupted and purchased bonds put back on the market when intervention is no longer necessary.

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