The European Central Bank has spent many billions buying government bonds for years. It's no secret that Karlsruhe is critical of this. Now the verdict comes - in the middle of the corona crisis.
Karlsruhe (dpa) - Before the ruling by the Federal Constitutional Court on the controversial government bond purchases by the European Central Bank (ECB), plaintiff Peter Gauweiler hopes to strengthen the role of the Bundestag.
"The trillion programs that burden the German state budget via the ECB have not been discussed in parliament for a single hour in Germany," said the former CSU vice chairman and long-time member of the Bundestag of the German Press Agency in Karlsruhe. The bodies of the central bank were removed from any democratic control. That was not correct. "The directional decisions should be made by people who can be elected and who can also be voted out of office."
The verdict will be announced this Tuesday (May 5). There is accusation that the ECB is banning government financing and economic policy with purchases to stimulate the economy and inflation. The constitutional complaints from Gauweiler and other plaintiffs (Az. 2 BvR 859/15 and others) are directed against the large sub-program PSPP for securities in the public sector.
Between March 2015 and the end of 2018, the ECB had invested around 2.6 trillion euros in government bonds and other securities under its then president Mario Draghi, a good 2.1 trillion euros via PSPP (Public Sector Purchase Program). As of November 1, 2019, the controversial purchases were reissued, initially in a comparatively small amount of EUR 20 billion a month.
It has long been clear that the constitutional judges are very critical of bond purchases. Because it is about EU law, they turned on the European Court of Justice (ECJ) in Luxembourg in summer 2017. He declared the purchase program against the concerns from Germany in December 2018 to be legal in all respects.
The fact that the German judges were not convinced had become apparent at the Karlsruhe trial at the end of July 2019. So there is also an open conflict with the ECJ in the air. Because to show the ECB limits, the Karlsruhe judges would have to ignore the preliminary decision from Luxembourg. The Federal Constitutional Court has always reserved this - but only in the event that an ECJ judgment is "no longer understandable".
In the worst case, the constitutional court of the Deutsche Bundesbank could prohibit participating in the bond purchases. This would have a noticeable impact because the Bundesbank is the largest shareholder in the ECB - if it were to fail, around a quarter of the purchase volume would be lost in one fell swoop. The more realistic scenario might be that the judges formulate conditions that will have to be met in the future for German participation in the purchases.
The verdict was supposed to be announced on March 24, but the date had to be postponed due to the outbreak of the corona pandemic. Now it takes place under safety precautions.
The timing is extremely tricky because the euro area is in a state of shock anyway due to the serious impact on the economy. In response, the ECB has increased its current purchase programs by an additional 120 billion euros by the end of 2020. The money is expected to flow primarily into corporate paper. An extra crisis program with 750 billion euros should run at least until the end of the year - and be expanded "without restriction" if necessary. These programs are not part of the process. Possible conditions could have an indirect effect.
For Gauweiler that is still not the biggest concern. "I've been worried for 20 years about how to pry out a parliament and how to pry it out," he said. "Nobody chose Ms. Lagarde, nobody chose Mr. Draghi. Nevertheless, they assume a mandate that defines the political direction." Frenchwoman Christine Lagarde has headed the ECB since November.
Ex-AfD politicians Bernd Lucke and Hans-Olaf Henkel are among the plaintiffs in Karlsruhe. The Berlin finance scientist Markus Kerber, who represents another group of plaintiffs, criticized the fact that the legal dispute has now been going on for more than five years and that the ECB was able to continue to buy bonds unhindered during this time. This means that a third of the sovereign debt of the euro area is now on the balance sheets of the central banks, he emphasized in a statement.