German Top Court Likely to Say ‘Yes, But’ to ECB Policy

Germany’s top court probably won’t intervene in the European Central Bank’s plan to buy bonds of crisis-torn countries, in line with previous cases involving the country’s integration with the European Union.

The ECB’s Outright Monetary Transactions program and the European Stability Mechanism will be reviewed by the Federal Constitutional Court in Karlsruhe at hearings this week. While the judges may voice doubts about the central bank’s plans, the court won’t stop it, said Christoph Ohler, a law professor at Jena University.

“It’s tough to say exactly how the court will handle this, but we can expect something close to the ’yes, but’ approach the judges have used before in European integration and euro-rescue operation cases,” said Ohler. “The court has never blocked anything on the European level, but in the ’strings-attached’ part unusual and surprising details can always pop up.”

The dispute will pit the ECB against Bundesbank President Jens Weidmann, who voted against the OMT, in a case that could underline the limitations the ECB faces in its crisis policy. The court last year allowed Germany to ratify the 500 billion-euro ($660 billion) ESM bailout facility and the EU fiscal pact while ruling the measures must include provisions that the country won’t be forced to assume higher liabilities without its consent.

The September ESM ruling was preliminary and didn’t cover the bond program. The plaintiffs, including an opposition political party and a lawmaker from Chancellor Angela Merkel’s CSU Bavarian sister party, can address the central bank and some remaining ESM issues at a two-day hearing that starts tomorrow.


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell