German court decision complicates ECB coronavirus efforts

On May 5, the German Federal Constitutional Court ruled in a landmark decision that the European Central Bank (ECB)’s current quantitative easing bond purchasing program conflicts with German basic law. The ECB had started to implement this monetary stimulus program in 2015 to support Europe’s slow economic recovery following the eurozone crisis. In its decision, the court put the ECB on notice arguing that the institution failed to conduct a “proportionality assessment” to evaluate whether its bond purchases’ economic impact exceeds the bank’s mandate. The judges warned that if the ECB does not comply with the ruling within three months, the German Bundesbank will be barred from continuing to take part in the ECB’s quantitative easing program. In addition to potentially impairing Europe’s monetary stimulus, the German court’s decision might also weaken the EU’s legal order by undermining the authority of the European Court of Justice (ECJ). This ruling does not concern the ECB’s recent measures, namely the Pandemic Emergency Purchase Programme (PEPP), to mitigate the economic repercussions of the coronavirus. However, the ruling could force the ECB to adjust these measures going forward.

Atlantic Council experts react to the court decision and what it means for the European Union and the European Central Bank:

 
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Πηγή: atlanticcouncil.org