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Compatibility of ECB’s Outright Monetary Transactions with TFEU

By 2010 the international financial crisis that began in 2008 had become a sovereign debt crisis in various States of the euro area. When, in the summer of 2012, investors’ doubts about the continued survival of the euro became increasingly widespread, that prompted apparently unstoppable increases in the risk premia for the government bonds of those States, leading to a critical financial situation.

In that exceptional situation, the ability of the European Central Bank (“ECB”) to properly carry out its monetary policy mandate was put at risk. By a press release of 6 September 2012, the ECB announced that a decision had been taken concerning a programme for purchasing government bonds issued by States of the euro area, which was to be known as the “OMT programme”.1 Details of the basic features of the programme were given in the press release but the legal instruments for regulating the OMT programme have not yet been adopted.

The ECB stated that it was ready to use the programme to purchase on secondary markets government bonds issued by States of the euro area, subject to certain conditions: (i) the States concerned had to be subject to a financial assistance programme of the European Financial Stability Facility (“EFSF”) or the European Stability Mechanism (“ESM”), a programme that had to include the possibility of EFSF or ESM purchases on the primary market; (ii) transactions would be focused on the shorter part of the yield curve; (iii) no quantitative limits would be set in advance; (iv) the ECB would receive the same treatment as private creditors, and (v) the ECB undertook that liquidity created would be fully sterilised.

In Germany a number of politicians, professors of law and of economics, a journalist and an NGO brought proceedings before the Bundesverfassungsgericht (Germany’s Federal Constitutional Court; “BVerfG”) against the Bundesregierung (Federal German Government): they complained that their fundamental rights had been infringed as a result of the failure of the German Government to challenge the announcement concerning the OMT programme in an action for annulment before the Court of Justice of the European Union. The parliamentary group Die Linke brought proceedings before the BVerfG on the ground of a conflict between constitutional bodies, seeking a declaration that the Bundestag should work to achieve the annulment of the OMT programme.

Click here for full press release

 

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