The German Constitutional Court gives green light to the ECB’s anti-crisis program – The World

Le Monde | 21/06/2016 at 11:02 • Updated 21/06/2016 at 11:12 | By Marie Charrel

The case is finally decided. After years of debate and twists, the German Constitutional Court in Karlsruhe made, Tuesday, June 21, its final judgment on “outright monetary transactions” (OMT) program which, in theory, the European Central Bank ( ECB) to buy state bonds in unlimited

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in detail, sixteen German judges had to determine if it conforms to the Constitution. They feel that this is the case, while still emitting a few more or less restrictive conditions.

“The OMT program does not exceed the powers conferred on the ECB,” says a statement posted on the institution’s website. “in addition, if interpreted in accordance with the judgment of the European Court of justice, it presents no threat constitutionally relevant under the law of the German Parliament to vote on the budget. “

While the ECB is under fire from German critics for several months, and two days before the British referendum on maintaining (or not) in the European Union, the judgment was highly anticipated by observers.

• what the Court of Karlsruhe?

the federal constitutional Court was established in 1951 based in Karlsruhe, Baden-Wurttemberg. The mission of its sixteen judges is to verify the compliance of laws with the Basic Law. 1949 – the equivalent of our Constitution

The court was created so that the country does not return by experienced traumatic experiences between 1930 and 1945. Its role is, in fact, to limit the power of policies, to prevent them from being tempted to violate the Constitution.

“Since 1945, Germans consider it essential that a power-control against the government, to ensure that it does not overstep its mandate “, summarized Charles Wyplosz, of the Institute of international studies Geneva.

Powerful and highly respected in Germany, Karlsruhe court makes judgments high political value. It may well invalidate the legislation adopted by Parliament if it considers that they violate the Basic Law. Any German citizen can file a “constitutional complaint” if it considers that one of its rights are violated by a public authority.

• Why the German Constitutional justice she looked at the ECB’s program?

in 2013, a group of individuals and a former Eurosceptic MP lodged with the Court of Karlsruhe. According to them, the WTO would allow the ECB to directly finance governments, the risk that German taxpayers pay the final bill. Moreover, they argue, the program would lead the institution to interfere in the economic policies of states. One of the conditions to trigger the OMT is, in fact, that the countries attacked by speculators have first requested a loan from the European Stability Mechanism (ESM). But this loan is necessarily accompanied by structural reforms

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Before making a final decision on the subject, the Constitutional Court requested, in January 2014, the Court of justice of the European Union (ECJ) to decide, since the ECB is subject to Community law. In June 2015, the ECJ gave its green light for Draghi. She felt that the WTO was indeed a strictly monetary program consistent with European treaties

On June 21, the Court of Karlsruhe ruled in turn. The relief of the markets and observers, it s is row with the opinion of the ECJ.

• What consequences for the ECB?

In theory, the European Central Bank did not risk much, since the WTO is still theoretical. Experts nevertheless feared that a negative decision would harm the credibility of quantitative easing ( “quantitative easing” in English, or QE), the other debt purchase program of the ECB, which, unlike the WTO volumes are limited. What would have been boring. For, if “Brexit” such a firewall would prove essential to prevent a new outbreak of the sovereign rates …

The Court has avoided this by giving the green light: the German central bank the Bundesbank, may well participate in the WTO if the ECB decides to activate. The judges nevertheless placed some conditions, already mentioned by the ECJ: the amount of purchases should not be announced in advance, for example, and use this program must remain exceptional

. in addition, the judge specify that purchases will in fact be … limited. A ruse analyzed differently according to economists. For some, this condition is symbolic, what is important is that Karlsruhe has given the green light to the UNWTO. The proof: the markets have little reaction to the announcement. Others believe, however, that this condition is rather restrictive. While admitting that it is of little importance, and that the WTO remains virtual. And legal under German law.

• What are the next steps?

The ECB has unfortunately not finished with Karlsruhe. In 2015, it also received other complaints, this time regarding QE. These emanate from heads of German companies and academic who accuse again, the ECB beyond its mandate by buying debt. The Constitutional Court will decide in the coming months on the subject.

These repeated complaints fall badly for the Mint, whose policy is violently criticized by a part of the German political and economic class . This considers in particular that its low rate unfairly penalize savers, while risking to promote the creation of a financial bubble.