German court dismisses case against ECB’s asset purchase programme
In 2020, the ECB’s PSPP programme, which purchased public sector securities on the secondary markets, ran into legal trouble, for failing to substantiate the principle of proportionality, Asset News had reported. However, the dismissal of new applications in this case is good news for the central bank.
The second senate of the German federal constitutional court had held the Federal government responsible, in its ruling of 5 May 2020. The court had stated that Bundestag had violated the applicants’ rights by failing to take suitable steps to counter the ECB’s failure to assess and substantiate that the PSPP satisfies the principle of proportionality. Under this principle, ECB had to demonstrate that the monetary policy objectives pursued by the PSPP are not disproportionate to the economic and fiscal policy effects resulting from the programme.
The judgement directed the federal government and Bundestag to ensure that the ECB will conduct the necessary proportionality assessment, which the applicant contend that the central bank has yet to satisfy. The court ruled that these applications are inadmissible as the federal government and Bundestag addressed and appraised the monetary policy decisions taken by the ECB Governing Council following the 2020 judgement. Bundesbank had submitted several ECB documents to the Federal Ministry of Finance, following which the Bundestag adopted a resolution declaring that the proportionality assessment conducted by the ECB Governing Council satisfied the requirements set by the court.