ECB, Bundesbank Checking If Bond Buying Is Legal

The European Central Bank and Germany’s Bundesbank are examining the legality of the ECB’s new bond-buying program, a German newspaper said on Tuesday, pointing to another possible barrier to moves to end the euro zone debt crisis.

German tabloid Bild, which did not give details of its sources, said ECB and Bundesbank in-house lawyers were checking what scale and duration the program could reach before breaching European Union treaties.

The newspaper said this meant there was a possibility that the issue could soon be referred to the European Court of Justice and added that the ECB and Bundesbank wanted to legally “arm” themselves for this scenario.

The report alarmed financial markets, which lauded the bond-buying announcement this month as the sort of bold action needed to end the crisis. The euro fell in response.

Bild said the background to this was controversy over the issue of whether the ECB bond-buying program violates the ban in EU treaties of direct financing of state deficits.

The Bundesbank and the ECB would not comment on the story. ECB President Mario Draghi said earlier this month, when he announced the program, that he was certain it abided by the rules.

“We are sure that we are acting within our mandate, that we are not violating Article 123,” he told a news conference after the bank’s monthly decision on interest rates. Article 123 prohibits the ECB financing governments.

Via – CNBC


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