German lawmakers ended a legal standoff over the European Central Bank’s bond buying, backing a monetary program seen as a key prop for the euro area’s battered economy.
A broad alliance of Chancellor Angela Merkel’s coalition parties together with the Greens and the pro-business Liberal Democrats voted to accept the explanation the ECB provided for its so-called public sector purchase program, or PSPP. The motion sends a signal that Germany’s political establishment intends to keep Europe together.
The dispute was sparked by Germany’s top court, which ruled in May that the 2.2 trillion-euro ($2.5 trillion) PSPP, which began in 2015, could be illegal. The judges said the German parliament should have challenged the ECB to show that it had considered adverse side effects. The parliamentary vote means that the Bundesbank can stay in the program.
The vote meets the Constitutional Court’s demand that the Bundestag, Germany’s lower house, review whether the ECB’s bond-buying program is “proportionate.” The measure approved Thursday says the Bundestag considers “the ECB’s statement to complete a proportionality check as comprehensive,” fulfilling the constitutional court’s ruling.
“It’s a strong signal that four parliamentary groups support the motion,” Andreas Jung, a deputy caucus leader of Merkel’s Christian Democratic Union, said during the pre-vote debate. “It’s a signal for Frankfurt that the Bundesbank will continue to take part in the program.”
ECB Executive Board member Yves Mersch claimed victory in advance earlier on Thursday, saying he saw “no obstacle” to the Bundesbank continuing its purchases.
The Governing Council had authorized the disclosure of several documents in late June to help lawmakers settle the dispute. To safeguard the ECB’s independence, they were passed on by Bundesbank President Jens Weidmann.
“The German authorities have assessed the PSPP as proportionate before the Constitutional Court,” Mersch said in a speech for a webinar on Thursday. “With the new documentation, they are in a position to further corroborate their initial finding if necessary.”
Lawmakers from Merkel’s coalition and the Green party said in floor speeches that they’ll seek to intensify the parliament’s dialogue with the Bundesbank on how monetary policy is impacting the economy.
The ECB “has been making a big contribution to the stabilization of monetary policy for years,” said Social Democratic lawmaker Christian Petry, whose party is Merkel’s coalition partner. “Germany will only be able to move forward in tandem with Europe.”
The ruling triggered a debate as to whether a national court was infringing on ECB independence and seeking to override the EU’s top tribunal, which had backed the program. It also potentially opens the door for future legal challenges from euro critics, such as the far-right Alternative for Germany.
The plaintiffs behind the lawsuit have said they’re looking to use similar arguments to those made in the verdict when they take action against the bank’s 750 billion-euro ($810 billion) Pandemic Emergency Purchase Program.
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