PSPP is beyond what the ECB is allowed to do
The decision today by the German Bundesverfassungsgericht (BverfG) holding that the ECB and CJEU acted ultra vires is obviously one for the books. It touches upon a wide variety of topics, both specific to EMU and EU law more generally, such as the nature of proportionality review, the role of courts in reviewing expert bodies, blackout periods and the holding until maturity of government bonds.
Three important points:
- The BverfG maintains that the Court of Justice of the European Union (CJEU) did not properly review the ECB’s measures since the economic effects of these measures were not taken into consideration; and
- The PSPP goes beyond the competence of the ECB, as it is better qualified as an economic policy, rather than a monetary policy;
- The verdict will spell trouble for the current efforts of the ECB in the corona crisis.
Analysis: “Karlsruhe bites with a vengeance”
By: Marijn van der Sluis – Maastricht University
Not the time to go after PEPP now
If markets continue to test the ECB as the Eurozone’s last line of defense then the ECB should send another strong signal of its commitment to act as a backstop to governments. This implies that the ECB will need to “supercharge” PEPP by a) extending the program beyond October; and b) accept bonds that lose their investment-grade credit rating as collateral. This way the ECB will neutralize most of the additional supply in Eurozone sovereign bond markets that stems from governments’ fiscal response to the Covid-19 crisis.
ECB: Show and Tell
By: Allianz Research
Time for a fiscal counterpart to the ECB?
This column argues that the time has come for genuine European spending financed through European borrowing. It examines the legal and financial issues around the possible implementation of a proposal for the Commission to issue consolidated annuities (‘EU Consols’) to finance a €1 trillion economic reconstruction package.
But the BverfG decision will raise concerns about the compatibility of this European Construction Fund with Article 123 TFEU: will the ECB be able to purchase these EU Consols?
Towards a European Reconstruction Fund
By: Luis Garicano – Member of the European Parliament
