Brussels, 07/02/2014 (Agence Europe) - On Friday 7 February, Germany's constitutional court in Karlsruhe sought the opinion of the European Court of Justice on the European Central Bank's OMT bond-purchase scheme for the unlimited but conditional purchase of sovereign bonds from struggling eurozone countries.
This is the first time that the German court has done anything of this nature. On 18 March, it will issue a ruling on the OMT scheme, based on the opinion of the European Court of Justice. In a press release, the German court said it was difficult to decide at the outset whether the OMT programme is compatible with the ECB's prime job, laid down in the EU treaties, of tackling inflation. Six of the eight Karlsruhe judges say that the ECB has gone beyond its powers because it is not allowed to buy into national budgets. In parallel, the German court says, however, that the restrictions placed on OMT, like the need for beneficiary countries to be subject to a bailout from the European Stability Mechanism (ESM), can make the scheme compatible with the powers of the member states and German constitutional law.
The OMT scheme has never been activated. It was set up as a way of meeting the promises made in the summer of 2012 by the president of the ECB, Mario Draghi, to do all it takes to ensure the integrity of the eurozone (see EUROPE 10683) by making the ECB a lender of last resort. Announcement of the scheme reduced the refinancing costs for struggling eurozone nations, despite the German central bank's disapproval. OMT replaces the SMT programme used by the ECB to buy up €208.7 billion worth of sovereign debt (€99 bn of it from Spain). (MB/transl.fl)