Germany’s top court threw out a cease-and-desist request that could have halted the European Central Bank’s giant bond-buying program, offering some comfort to ECB policy makers as they prepare to extend the purchases into 2018.
The Karlsruhe-based constitutional court ruled as “inadmissible” a request for a temporary injunction to the program, known as quantitative easing, in a statement Wednesday.
Granting a temporary injunction “would go beyond the mere safeguarding of the status quo and would be largely identical to a decision in the main case,” the court said.
The injunction request is separate to a broader lawsuit that questions the legality of the QE program, which the German court referred in August to the European Union’s top court in Luxembourg. German plaintiffs have claimed the ECB is violating a ban on the direct financing of governments through its bond purchases.
German courts can’t stop the ECB’s stimulus programs directly, but they can prevent the involvement of Germany’s Bundesbank, which holds around a quarter of the ECB’s share capital.
Worried that the German court wouldn’t issue a final ruling until QE was already finished, a Berlin-based law professor, Markus Kerber, filed a cease-and-desist request in May in an effort to quickly end Germany’s involvement in the program.
The move showed the lengths to which some Germans are prepared to go to derail a program they accuse of subsidizing southern European governments and hurting German savers, pensioners and smaller companies.
But the court argued Wednesday that halting Germany’s participation in QE would “severely restrict or even prevent” the objective of the program because of the large share of bond purchases made by the Bundesbank.
German judges had voiced misgivings about QE in their August ruling, saying it was doubtful whether these asset purchases were compatible with the prohibition on monetary financing.
The ECB has bought more than EUR2 trillion ($2.4 trillion) of bonds under QE, which is credited for sparking a robust economic recovery across the 19-nation eurozone. With inflation still weak, ECB officials are expected to announce an extension of the program next week, with purchases made at a slower pace.
Source: Dow Jones