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Thursday, June 13, 2013

'The European Central Bank’s Outright Monetary Transactions and the Federal Constitutional Court of Germany'

For those of you interested in the finer details of the legal issues surrpounding ECB government bond purchases, Volker Wieland emails that he has a new note (together with Helmut Siekmann, a law colleague of his and a leading authority and currency and central bank law) "on the legal issues and concerns that the German Constitutional Court is deliberating on regarding the ECB's OMT, including some analysis of what is to be expected in terms of a decision. It is written not as advocacy piece but as an explanatory contribution":

The European Central Bank’s Outright Monetary Transactions and the Federal Constitutional Court of Germany Helmut Siekmann and Volker Wieland, June 11, 2013: Abstract This note reviews the legal issues and concerns that are likely to play an important role in the ongoing deliberations of the Federal Constitutional Court of Germany concerning the legality of ECB government bond purchases such as those conducted in the context of its earlier Securities Market Programme or potential future Outright Monetary Transactions.
1. The OMT controversy and how it became central to the German Constitutional Court’s deliberations in summer 2013 The European Central Bank’s August 2, 2012 announcement that it would be willing to buy government bonds without limit in certain scenarios arguably constitutes the most controversial decision in its 15-year history. Already the limited purchases of euro crisis countries’ sovereign bonds under the ECB’s Securities Markets Programme (SMP) since May 2012 had been cited as the reason for the resignations of Axel Weber, then-President of the Bundesbank and member of the ECB Governing Council, and Jürgen Stark, then the ECB Board Member in charge of its Directorate General Economics. The 2012 announcement of potentially unlimited future Outright Monetary Transactions (OMT) was publicly opposed by Jens Weidmann, Weber’s successor as Bundesbank President, and has been criticized heavily by former ECB Board Members Otmar Issing and Jürgen Stark, while Stark’s successor, Jörg Asmussen, turned out to be a staunch supporter of this policy. Weidmann and Asmussen have been called to testify during the hearings of the Federal Constitutional Court on June 11- 12, 2013 on the legitimacy of the OMT. In this note, we review the legal issues and concerns regarding the OMT that will be the focus of the Court’s deliberations and discuss potential outcomes. ...

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