Brussels, 13/01/2015 (Agence Europe) - This Wednesday 14 January, the Advocate General of the Court of Justice of the EU, Pedro Cruz Villalón, will return his conclusions (case C-62/14) on the legality of the ECB's 'OMT' programme to buy back sovereign debt of eurozone countries on the secondary market.
This 'Outright Money Transactions' programme, which was devised by the monetary institute in 2012 and which has never been used, essentially aims to counter speculation and prevent an inflation of interest rates on this debt. It reflects the promise made by ECB President Mario Draghi to do everything possible to save the euro.
This opinion is a significant one, as it could have an impact on how the Governing Council of the ECB will unveil, on 22 January, a further programme for the mass buy-back of financial securities in order to combat the threat of deflation in the eurozone. This 'quantitative easing European style' could include public debt securities. In the first-ever move of this kind, the Court was asked in February 2014 by the German Federal Constitutional Court (Karlsruhe) for a preliminary ruling, further to a request to the Bundestag by the parliamentary group Die Linke. The German Court, to which the case had been brought by a group of individuals, has asked whether, by setting in place the OMT, the ECB has exceeded its monetary policy mandate and, in particular, whether these measures are a matter for economic policy (a field in which the ECB has no competence) and violate the prohibition on the monetary financing of State debt (art.123 TFEU).
More specifically, the German Court raises problems of: - conditionality: the buy-back measures are subject to the solicitation, by the beneficiary states, of conditional financial assistance under the European Stability Mechanism (ESM); - selectivity: the buy-back of government bonds is provided for selected member states only; - parallelism: the programme comes in addition to those of the European Financial Stability Facility and the ESM; - circumvention: the programme could circumvent the restrictions and conditions of the assistance programmes of the EFSF and of the ESM. The Karlsruhe Court also flags up the fact that there are no quantitative limits for government bond purchases, nor any specific requirements as to their quality. Another issue is the equality of treatment provided for between the European System of Central Banks and private owners of government debt. If the Court of Justice of the EU validated the 'OMT' programme without leaving any margin for interpretation (at best, the ruling is expected in several months' time), the German courts could reject the judgment. Political negotiations are therefore underway and the most likely scenario, according to experts, would be a verdict that takes partial account of the German objections. (FG)