Europe’s Court Will Decide on Bond-Buying by ECB

An emergency measure that was credited with stabilising the euro has been referred to Europe’s top court.

On Friday, Germany’s constitutional court said that the European Central Bank’s (ECB) bond-buying scheme could be “incompatible” with EU law.

The European Court of Justice will now decide the legality of the so-called debt “backstop”, introduced in 2012.

Although the ECB has not used the emergency power, its existence calmed turmoil in European financial markets.

When he announced the Outright Monetary Transactions (OMT) programme, ECB President Mario Draghi said he would do “whatever it takes” to save the single currency.

But the German court has said there was good reason to think the OMT violated a ban on the bank funding governments.

In a statement, the court added: “There are important reasons to assume that it exceeds the European Central Bank’s monetary policy mandate and thus infringes the powers of the member states.”

via BBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza