German parliamentarians back ECB bond purchases
A BROAD coalition of ruling and opposition parties in Germany has agreed on a draft motion to back the European Central Bank’s (ECB) bondbuying programme, according to two officials familiar with the accord, likely ending a standoff that was triggered by the country’s constitutional court last month.
At a meeting of party representatives yesterday, Chancellor Angela Merkel’s coalition partners as well as the Greens and the Liberal Democrats agreed in principle to accept explanations the ECB provided on its so-called public sector purchase programme, or PSPP, the officials said.
Finance Minister Olaf Scholz earlier received ECB documents supporting its case from the Bundesbank and passed them on to Bundestag president Wolfgang Schaeuble, several other people said.
The draft motion will still have to be accepted by the party caucuses and the parliament will have a final say later this week, they said.
But a broad approval is seen as highly likely given that senior politicians from Ms Merkel’s Christian Democratic-led bloc are backing it and the Social Democrats as well as the Greens have long been supporter of the ECB’s monetary policies.
A parliamentary sign-off would fulfil the constitutional court’s demand that the German Bundestag needs to review whether the ECB’s bond-buying programme is “proportionate”.
Germany’s top court ruled in May that the €2.2 trillion PSPP could be illegal. The judges said the German parliament should have challenged the ECB to show that it had considered adverse side effects, such as depressed returns on savings as well as financial instability. The judges ruled that if the programme isn’t shown within three months to be “proportionate” to the risks then the Bundesbank, the biggest buyer, will have to withdraw.
Mr Scholz told Schaeuble that the ECB has fulfilled the demands of the constitutional court and that the Bundesbank is “permitted to continue to participate in the implementation and execution” of the
PSPP, the Frankfurter Allgemeine Zeitung reported.
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. After weeks of looking for a way out of the stalemate, the ECB agreed to provide the documents explaining the bond-buying programme to Bundesbank president Jens Weidmann.
Those documents highlight “how the ECB has assessed and continues to assess the proportionality of the PSPP and of all its instruments of monetary policy,” ECB president Christine Lagarde said yesterday while defending the programme in a letter to a German member of the European Parliament, Sven Simon.
“The ECB constantly evaluates whether its monetary policy measures – including the PSPP – achieve their intended purpose, are commensurate with the risks to our price-stability objective, and proportionate in their execution,” Ms Lagarde wrote.