ECB bond purchases: Critics file an urgent petition before the Federal Constitutional Court

The plaintiffs want to exclude the Bundesbank from the execution of the bond purchases of the European Central Bank (ECB): Only a few days after the vote by the central bank council to resume the bond purchases, critics have filed an urgent petition to the Federal Constitutional Court.

The plaintiff group around the economics professor Johann Heinrich von Stein want to reach thus the provisional stop of the purchases. The judges should prohibit the Bundesbank by way of a temporary injunction to participate in the purchases, their lawyer, the financial scientist Markus Kerber said. "Everything else would be another license to gamble."

The ECB decided in September to buy back government bonds and other securities worth € 20 billion per month from November onwards. Last week, the Governing Council confirmed this course. The central bank had acquired by the end of 2018 titles for 2.6 trillion euros. After that, the purchases were stopped and only expiring bonds were replaced.

With this policy of cheap money, the ECB wants to boost the economy and help inflation in the euro area to a level of about two percent. For a long time, a policy in Karlsruhe, in which Kerber is also involved, has been running against this policy, which was largely shaped by outgoing ECB President Mario Draghi. At the end of July, the Constitutional Court held a one-and-a-half-day trial. The new bond purchases had already hinted at that time.

Bundesbank boss critical of green monetary policy

The plaintiffs argued that the ECB decision to restart the transactions was not unanimous. He was among other things against the resistance of the central banks from Germany, France, the Netherlands and Austria fell, said Kerber. However, these countries account for more than 60 percent of the economic output of the eurozone.

"Against this background, the Federal Constitutional Court should respond," said Kerber. However, the European Court of Justice (ECJ) had already declared the ECB purchase program to be lawful in December. A ruling by the Federal Constitutional Court is pending.

When asked which bonds should be purchased by the central banks, Bundesbank President Jens Weidmann has meanwhile opposed a preference for green bonds. "Our mandate is price stability, and we must follow the principle of market neutrality when implementing our monetary policy," Weidmann said. According to Weidmann, a monetary policy that explicitly pursues environmental policy goals threatens to overburden.

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In the long term, their independence could be called into question, said Weidmann. "I think a determined and effective climate policy is necessary - but only with the right instruments and by the democratically legitimized actors," said the boss at the financial market conference of the German Federal Bank. The central banks would accompany the transition to a low-carbon economy. But it is the task of politics to determine the necessary change.