The constitutional court ordered the government and parliament to carry out a “proportionality assessment” of the ECB’s €2.2 trillion government bond purchasing scheme. It even threatened to block the Bundesbank, Germany’s central bank, from participating in future asset purchases if the ECB failed to make changes within a three-month transitional period. Arch federalist Guy Verhofstadt tore into the ruling by the Karlsruhe-based court, questioning its right to challenge the independence of the ECB.
The Belgian MEP said: “If every constitutional court of every member state starts giving its own interpretation of what Europe can and cannot do, it’s the beginning of the end. The EU’s constitutional watchdog is the European Court of Justice and that’s the way it should remain!
“Clearly, now that the German Constitutional Court tries to cut the wings of the ECB, the European Commission has to take its political responsibility and come forward with a bold trillion sized Recovery and Reconstruction plan.”
The German court said the ECB must prove its bond-buying programme’s “economic and fiscal policy effects” did not outweigh other policy objectives.
A former member of the ECB’s executive board warned the German decision risks the central bank’s independence.
Lorenzo Bini Smaghi said: “It’s a very dangerous argument.
“The next time the ECB raises interest rates it would have to look at all the negative effects it would have on debtors, the unemployed or on governments whose borrowing costs would rise. It is a very delicate argument that would lead to infringement of independence and of the price stability mandate.
“It would be really peculiar if the Germans were now challenging the independence of the ECB.”
But the EU’s most influential country was also accused of undermining the European Court of Justice.
The constitutional court disregarded a 2018 ruling by the EU’s top court that ECB bond-buying was legal.
It is the first time a national court has declared an ECJ judgement as invalid.
The ECJ’s decision was deemed to be “not comprehensible”.
The German court’s statement said: “The review undertaken by the CJEU with regard to whether the ECB’s decisions on the PSPP satisfy the principle of proportionality is not comprehensible; to this extent, the judgment was thus rendered ultra vires.”
He added: “Jacques Delors recently warned ‘the germ is back’ and pointed to the lack of European solidarity as a mortal danger to the EU.
“Today’s ruling… marks the return of legal nationalism. And as economists know: for a monetary union, economic nationalism can be lethal.”
Catherine Barnard, a professor of EU law at the University of Cambridge, said: “There are so many constitutional issues in this case.
“The most dramatic is that it is so overtly critical of the ECJ. They really get stuck in.”
Published at Wed, 06 May 2020 09:18:00 +0000