Germany’s Supreme Court rejects new challenges to the European Central Bank
The German Constitutional Court rejected the latest attempt to block the European Central Bank’s purchase of sovereign bonds, which puts the Eurozone’s flagship monetary policy plan facing six years of legal challenges.
The country’s Supreme Court on Tuesday rejected an application to review its May 2020 ruling, which ordered the German Parliament and the Central Bank to review the impact of the European Central Bank’s asset purchase plan.
The court said: “The application is not allowed, and added that the plaintiff has exceeded the scope of the execution order procedurally permitted… In view of the fact that the requested order will exceed the facts and legal focus of the court in the above judgment.”
It said: “Considering the decision of the Federal Government and the Bundestag on May 5, 2020, the Federal Government and the Bundestag have substantially processed and evaluated the ECB Council’s monetary policy decisions, including the proportion of the ECB’s conduct and confirmation. Evaluation, these applications are also unfounded.”.
The complainant (a group of approximately 1,750 people led by German economists and law professors) first filed a lawsuit in 2015. They argued that the European Central Bank is suspected of providing currency financing to the government, which is illegal under the EU treaty.
Last year, the Karlsruhe court did not rule that the European Central Bank violated the law, but it ruled that the German government and parliament failed to ensure that the European Central Bank conducted a “proportional assessment” of its 2.4 billion euros of sovereign bonds and purchase plans.
It said that unless this assessment is made, the Bundesbank will have to stop buying bonds on behalf of the European Central Bank and develop a plan to sell more than 500 billion euros in bonds it holds, a move that may jeopardize the entire plan.
However, this threat was avoided after the European Central Bank debated the proportion of its asset purchases and provided unpublished documents to analyze its impact on the German authorities. The document prompted the Minister of Finance to declare that the central bank had met the court’s requirements.
The European Central Bank relies on bond purchases as one of the main tools to deal with the economic impact of the coronavirus pandemic. Last year, China launched an emergency plan to purchase an additional 750 billion euros of bonds, which was expanded to 1.85 billion euros in December.
In response, the right-wing “German alternative” presented a new legal challenge to the European Central Bank, saying that it crossed the border into the ranks of financing the government because its new plan abandoned some self-regulating restrictions on previous asset purchases.