Top German court questions ECB bond-buying

German Constitutional Court judges - file pic Image copyright AFP
Image caption The German Constitutional Court seeks to clarify disputed areas of EU law

Top judges in Germany are set to examine a European Central Bank bond-buying scheme, because critics say it risks enabling the ECB to prop up indebted eurozone governments.

The German Constitutional Court is considering legal objections to ECB Outright Monetary Transactions (OMT) - a scheme launched in 2012 during the eurozone debt crisis, but not yet used.

The ECB is buying €60bn (£46bn; $67bn) of bonds monthly to help the eurozone.

That bond-buying is separate from OMT.

The announcement of OMT in 2012 by ECB President Mario Draghi had a calming effect on markets that were spooked by the eurozone sovereign debt crisis. OMT would involve unlimited bond purchases.

Mr Draghi famously declared that he would do "whatever it takes" to safeguard the euro.

Thwarting speculators

Last summer the European Court of Justice (ECJ) - the EU's top court - ruled that OMT was compatible with EU law. The scheme fell within the ECB's mandate of maintaining price stability, the ECJ decided.

The idea of the ECB buying up the sovereign bonds of a country in distress, to prevent speculators forcing up yields - the interest charged on those bonds - alarms some German politicians.

OMT purchases would be made under the strict terms of a eurozone bailout - a government would have to enact major economic reforms, in order to get such emergency ECB support.

Observers say the German court's ruling - not expected for months - could have an impact on the current ECB bond-buying programme, known as quantitative easing (QE).

The OMT critics in the German case include Peter Gauweiler, a conservative MP in the Bavarian CSU party, ex-justice minister Herta Daeubler-Gmelin (Social Democrat SPD) and leftist Die Linke MPs.

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