Mario Draghi defends ECB’s bond buying plan / Germany’s Federal Court reviews ECB bond purchases

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Series Details 03.06.13
Publication Date 03/06/2013
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Once again the financial world and European politicians looked at Germany's Federal Constitutional Court as in June 2013 judges there examined whether the European Central Bank (ECB) was within its mandate - and EU law - in purchasing billions in state bonds.

On the 11-12 June 2013, the German Constitutional court in Karlsruhe held public hearings on the legality of the European Central Bank's actions in the euro-crisis. The suit against the European Stability Mechanism (ESM), had been brought by a group of German professors, German parliamentarians and more than 37,000 citizens.

Mario Draghi, the President of the European Central Bank (ECB), had earlier during a speech in the International Monetary Conference in Shanghai on 3 June 2013 defended its plan, dubbed Outright Monetary Transactions (OMTs), to allows the ECB to buy bonds of eurozone member countries to bring down their borrowing costs.

"They can either reform without OMTs and retain economic sovereignty or they can reform with OMTs but give up some of their economic sovereignty," Mr Draghi was quoted as saying by the Associated Press news agency.

Although the court had no formal jurisdiction over the ECB the hearings in June 2013 were closely watched as a barometer of both elite and popular German sentiment about eurozone crisis-fighting measures in the run-up to the September 2013 German federal Berlin election.

At stake were two competing visions of monetary policy. One, represented by the Bundesbank, was that central banks must keep narrowly to their job of controlling inflation and ignore almost everything else, which must be left to elected politicians to deal with.

The other view, as argued by key figures in the European Central Bank was that the central bank was allowed under the treaties that established it to conduct unorthodox crisis-fighting measures such as the Outright Monetary Transactions bond-buying programme.

Source Link Link to Main Source http://www.bbc.co.uk/news/business-22749852
Related Links
European Central Bank: Press: Speech: Strengthening financial resilience http://www.ecb.int/press/key/date/2013/html/sp130603.en.html
ESO: Background Information: European Central Bank: (Un)Conventional policy measures http://www.europeansources.info/record/european-central-bank-unconventional-policy-measures/
EUObserver, 10.06.13: German court hearing on ECB actions this WEEK http://euobserver.com/agenda/120418
EUObserver, 11.06.13: Germany's top court hosts ECB showdown http://euobserver.com/institutional/120436
EurActiv, 11.06.13: ECB to defend bond-buying plan in German courtroom duel http://www.euractiv.com/euro-finance/ecb-defend-bond-buying-plan-germ-news-528475
BBC News, 11.06.13: ECB's eurozone rescue scheme challenged in Germany http://www.bbc.co.uk/news/world-europe-22852929
Spiegel Online International, 11.06.13: Decisive Days for Euro: High Court Considers ECB Bond Buys http://www.spiegel.de/international/europe/german-high-court-considers-challenge-to-ecb-bond-purchases-a-904745.html
Spiegel Online International, 10.06.13: ECB Case at High Court: The Bundesbank Is Playing a Dangerous Game (Commentary feature) http://www.spiegel.de/international/europe/top-economist-attacks-bundesbank-opposition-to-bond-buying-a-904888.html
Deutsche Welle, 11.06.13: Germany's Federal Court reviews ECB bond purchases http://www.dw.de/germanys-federal-court-reviews-ecb-bond-purchases/a-16871978
ESO: Background information: ECB's Mario Draghi unveils bond-buying euro debt plan http://www.europeansources.info/record/ecbs-mario-draghi-unveils-bond-buying-euro-debt-plan/
Website: Deutsche Bundesbank http://www.bundesbank.de/Navigation/EN/Bundesbank/bundesbank.html
Website: Federal Constitutional Court / Bundesverfassungsgericht http://www.bundesverfassungsgericht.de/en/
Spiegel International Online, 12.06.13: Crisis Course: High Court Skeptical of ECB Bond Buys http://www.spiegel.de/international/europe/german-high-court-skeptical-of-ecb-bond-buying-a-905246.html
EUObserver, 12.06.13: German top court 'not interested' in saving euro http://euobserver.com/economic/120465
Blog: The Economist: Charlemagne, 12.05.13: Germany and the euro The euro zone looks anxiously to Karlsruhe http://www.economist.com/blogs/charlemagne/2013/06/germany-and-euro
Blog: EurActiv.eu: ACELG, 18.06.13: To Rule or Not to Rule? Should the German Constitutional Court Have the Last Word in the Eurocrisis? http://acelg.blogactiv.eu/2013/06/18/to-rule-or-not-to-rule-should-the-german-constitutional-court-have-the-last-word-in-the-eurocrisis/
Open Europe: Flash Analysis, 10.06.13: The German Constitutional Court – a growing battleground in the eurozone crisis? http://www.openeurope.org.uk/Article/Page/en/LIVE?id=11491&page=FlashAnalysis
Ifo Viewpoint, No.148: Germany’s Case Against the ECB http://www.cesifo-group.de/ifoHome/policy/Viewpoints/Standpunkte-Archiv/stp-2013/Ifo-Viewpoint-No--148--Germany-Case-Against-the-ECB.html
EurActiv, 13.09.13: German constitutional court should not stymie emergency eurozone action http://www.euractiv.com/euro-finance/german-constitutional-court-stym-analysis-530449

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