German verdict expected on the ECB’s anti-crisis program – L’Express

Entering in 2013 by citizens and politicians hostile to the action of the central bank, the Constitutional Court based in Karlsruhe (south) at 0800 GMT will know if it considers this device in accordance with the German Basic Law.

The dispute ‘The OMT (Outright Monetary Transactions), an ECB program to buy back government bonds in unlimited quantities in market difficulties. Never used to date, it had been adopted in September 2012, when the public debt crisis was wobbling several countries in the euro zone.

The court decision is awaited. The central bank has since gone into high gear. To restart prices in the eurozone, it buys in bulk since March 2015 debt of European states as part of another program, called “ EQ .” Since the early redemptions also focus on corporate bonds.

– European green light –

In a first opinion in February 2014, the Karlsruhe Court had examined the complainants side, believing that with the OMT ECB probably exceeded its mandate. This one focuses on maintaining price stability in the eurozone. It is strictly forbidden to directly finance governments.

Before taking a final decision, the German supreme judges have requested the opinion of the European justice. This has reinforced the ECB in its action and found WTO consistent with its mandate.

A negative judgment of the German Court Wednesday “ would prohibit the Bundesbank to participate in the program and weaken the credibility of the program and certainly stirring up distrust of the Germans vis-à-vis “central bank, said Johannes Gareis, analyst at Natixis.

Such a decision certainly does not jeopardize the QE, the terms are very different from those of the WTO, but “ however make it more difficult for the ECB to extend the future debts purchases “added Michael Schubert, an analyst at Commerzbank.

The Bundesbank, Germany’s central bank, is one of the spearheads of the different debt buyback programs of the European institution, whose execution is entrusted to the national central banks.

However, the German court will “ likely want to avoid a legal conflict ” with the European justice anticipates Mr. Schubert.

For his colleague Andreas Rees of UniCredit, one must expect the judges in Karlsruhe accept the judgment of the European Court, while requiring the Parliament and the government they pass provisions in the German budget for losses via the UNWTO.

– Loans and Brexit giants –

The decision to Karlsruhe will be the first visit of a very busy week for the ECB, which is to launch Wednesday the first of a series four giant bank loans and very advantageous for European banks. The series, called “ TLTRO II “, is the second edition by the ECB since last year.

It is part of device deployed by the central bank to leave rates in the euro area, policy rates very low sides – the main one is to zero – and debt purchases.

In addition, the British referendum on Thursday on the maintenance of the United Kingdom in the European Union could bring the institution to the test. She is preparing for possible turmoil in the banking sector and the markets. The result of the vote will be known on Friday morning.

European monetary institution will be “ using all the instruments at its disposal ” in the event of materialisation of risks to price stability, including a prominently Brexit has she reported last week.

One of these instruments might be concerted action with other major global central banks in the form of liquidity injections, such as dollars or sterling.