German top court criticises European Central Bank crisis bond-buying

Germany’s top court has ruled that the European Central Bank’s mass bond-buying to stabilise the eurozone partly violates the German constitution.

The ruling relates to government debt worth trillions of euros bought by the ECB since 2015, but not purchases in the current coronavirus crisis.

The Constitutional Court in Karlsruhe says there is not enough German political oversight in the purchases.

Germany’s Bundesbank carries the most weight in the ECB’s decisions.

Italy is among the countries most reliant now on ECB bond purchases because of the severe economic impact of the coronavirus pandemic.

The mass bond-buying was launched after the eurozone’s 2010 crisis as support for the euro besides the EU’s national bailouts for Greece and some other countries.

The plaintiffs include a former leader of the far-right Alternative for Germany (AfD), Bernd Lucke. They argue that the purchases violate the EU ban on one eurozone member subsidising the debts of another.

The court ruled that the German government and parliament had failed to ensure that the ECB’s purchases were “proportionate”.

But the court did not find that the ECB’s actions had violated the EU ban on direct budgetary support.

The court also said “this decision does not concern the current EU or ECB financial aid provided in the coronavirus crisis”.

It is now up to the ECB to explain how its mass bond-buying programme is “proportionate”. The Bundesbank could pull out if it is not satisfied with the ECB’s explanation, which would be a big blow to the eurozone.