FRANKFURT — The German Constitutional Court on Tuesday cleared the way for continued Bundesbank participation in one of the European Central Bank’s key asset purchase programs, following years of legal wrangling.
Germany’s highest court dismissed the claim that the ECB had failed to provide adequate justification for the so-called PSPP, introduced to support the eurozone’s battered economy in 2015.
Concerns had previously been raised in relation to the EU’s principle of proportionality, a fundamental tenet of the bloc’s treaties, which holds that its institutions are only permitted to pursue actions they can show are justified and necessary. In May 2020, the court said the ECB’s 2015 bond-buying program may be illegal under German law unless this proportionality was demonstrated.
However, the ECB released a slew of documents on its considerations last June to the German government and parliament. The German parliament in July voted that the ECB had shown its PSPP was proportionate, a stance held up by Tuesday’s legal ruling.
“The Federal Government and the Bundestag substantially addressed and appraised the monetary policy decisions taken by the ECB Governing Council following the judgment of 5 May 2020, including the proportionality assessment conducted and substantiated by the ECB in its decisions of 3-4 June 2020 in that regard,” the court said in a statement.
The ruling comes as Germany’s constitutional court is already considering a challenge to the next ECB asset purchase program, launched in 2020 to fight the fallout from the coronavirus crisis. In that case, the plaintiffs are arguing the so-called PEPP amounts to monetary financing, which is prohibited under EU law.