The ruling raises questions about just how far the European Central Bank can push its monetary stimulusThe headquarters of the European Central Bank in Frankfurt, Germany. Picture: EPAEuropean Central Bank policymakers will jump on a conference call on Tuesday evening to plot how to respond to a surprisingly critical court ruling that cast doubt over their biggest crisis-fighting programme.
The decision is a “legal bombshell”, said Holger Schmieding, chief economist at Berenberg. “Whether the German constitutional court’s restrictions have an impact on market perceptions as to how effective the ECB can respond to the current economic emergency remains an open question.” German finance minister Olaf Scholz played down the judgment, saying the court “clearly ruled” that quantitative easing isn’t monetary financing and the programme complies with the German constitution.
Instead, in a complex decision, the judges ruled 7-1 that QE isn’t backed by EU treaties, and said German authorities should have challenged it. They said the ECB should have discussed a number of factors on how QE may have affected a wide swathe of the economy, including shareholders, renters and insurance buyers.
The ruling “only concerns the duty of the ECB to scrutinise its own action under a proportionality guideline and to document that”, said court president Andreas Vosskuhle. “The ECB isn’t, per se, blocked in any way.”
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