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Direct Cooperation Has Begun: Some Remarks on the Judgment of the ECJ on the OMT Decision of the ECB in Response to the German Federal Constitutional Court's First Request for a Preliminary Ruling

Published online by Cambridge University Press:  06 March 2019

Abstract

By its first request for a preliminary ruling, the German Constitutional Court aired its doubts about the lawfulness of the Outright Monetary Transactions (OMTs) program. In this article it is argued that the ECB's pledge in the summer of 2012 to do “whatever it takes” to safeguard the monetary policy transmission mechanism in all countries of the euro area by buying government bonds was generally compatible with EU law. However, it is argued that there is some potential for the ECB to infringe the Treaty on the Functioning of the European Union (TFEU) while acting according to this announcement. The peculiarity of the situation, the author argues, is that we might be dealing with a “self-fulfilling prophecy” in that the ECB announces a particular policy, which might not be compatible with EU law, but the act announced, will never take place because the political problem would have been resolved by the measure previously announced. The critical question in this scenario refers to how a court should react to such a situation. The author argues that a court in such a situation has to show the legal limits of the particular institution, but neither the ECJ nor the German Constitutional Court may replace the central banks' task to maintain financial stability. Finally, a comment is given on how the German Constitutional Court will react to the ECJ's decision in that case.

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Copyright © 2015 by German Law Journal GbR 

References

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2 See ECB Monthly Bulletin (Oct. 2012) 7–9, http://www.ecb.europa.eu/pub/pdf/mobu/mb201210en.pdf. Under the OMT program, the ECB and the national central banks will conduct outright transactions in secondary sovereign bond markets with the aim of safeguarding an appropriate monetary policy transmission and the singleness of the monetary policy. No ex ante quantitative limits are set on the size of OMTs, but only bonds with a maturity of one to three years may be purchased. Both the amount of holdings and their market values will be disclosed. Moreover, interventions by the ECB on the secondary market will be carried out only for countries that have requested European Financial Stabilization Mechanism (EFSF)/European Stability Mechanism (ESM) support and provided that the request is approved by the Eurogroup. Conditionality will be defined in the context of an EFSF/ESM macroeconomic adjustment program. The ECB would purchase bonds on the secondary market if and until the country complies with the conditions attached to the EFSF/ESM support. However, the ECB Governing Council will maintain full discretion on the start, continuation and suspension of the OMT transactions and it will adopt its decisions in accordance with its monetary policy mandate.Google Scholar

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Direct Cooperation Has Begun: Some Remarks on the Judgment of the ECJ on the OMT Decision of the ECB in Response to the German Federal Constitutional Court's First Request for a Preliminary Ruling
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