The European Union’s highest court said on Friday it alone has legal authority over the European Central Bank (ECB). It rejected the recent ruling in Germany questioning the ECB’s power to print money without members’ consent.
“In order to ensure that EU law is applied uniformly, the Court of Justice (ECJ) alone… has jurisdiction to rule that an act of an EU institution is contrary to EU law,” it said in a statement. “Divergences between courts of the member states as to the validity of such acts would indeed be liable to place in jeopardy the unity of the EU legal order and to detract from legal certainty.”
On Tuesday, Germany’s Federal Constitutional Court cast doubt on the eurozone’s key stimulus program by giving the ECB three months to prove that its key bond-buying program is justified and appropriate. Otherwise, the judges of the Karlsruhe-based court said, Germany’s own national central bank (the Bundesbank) could no longer participate in the program and would even have to sell bonds that it had purchased.
“The Bundesbank may thus no longer participate in the implementation and execution of the ECB decisions at issue, unless the ECB governing council adopts a new decision that demonstrates… the PSPP (public sector purchase program) is not disproportionate to the economic and fiscal policy effects,” they said.
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In its ruling, the German court broke with the ECJ, which had approved the bond purchases. The ECB has bought more than €2.6 trillion ($2.9 trillion) in corporate and government bonds in an attempt to raise inflation and weak economic growth in the 19 member countries that use the euro.
The ECB has recently also announced €750 billion ($813 billion) in new purchases to cushion the blow from the Covid-19 pandemic.
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