8th February 2014

Karlsruhe Court on ECB bond-buying

The German Federal Constitutional Court in Karlsruhe held a session on 7 February on the ECB bond-buying program, known as the OMT (Outright Monetary Transactions), and has for the first time in its history referred the issue to the Court of Justice of the European Union. The ECB announced the OMT program in September 2012, promising to buy bonds of states in difficult sovereign debt situation on the secondary market (that is from traders who had bought it from the emitting states) if necessary. This step satisfied and stabilized the markets. The German central bank opposed the scheme and brought it to Karlsruhe, arguing that OMT does not comply with the EU primary law, especially with the “no government funding” clause of the ECB Statute. In its statement, the Karlsruhe Court argues that the OMT is against the EU primary law in its opinion, but asks the EU Court of Justice several questions. Its final decision is to be based on the answers provided by the Luxembourg EU court, Luxembourg usually replies within 16 months at maximum. This way the Federal Constitutional Court de facto referred a sensitive EU political case to a different court, which has happened for the first time. Other similar and very sensitive eurozone cases are still lying on Karlsruhe´s table, including the European Stability Mechanism and the so-called fiscal compact.

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Members of the American Chamber of Commerce in the Czech Republic