FRANKFURT, June 29 — The German government has backed a European Central Bank bond-buying stimulus programme in a row with the country’s top court, according to a letter seen by AFP today.
In May, the Federal Constitutional Court (FCC) demanded a demonstration of the scheme’s “proportionality” after charging that ECB governors failed to sufficiently account for their policy’s side effects on the likes of banks and savers.
But “the finance ministry is convinced that the ECB council... has convincingly demonstrated its deliberations about proportionality,” according to the letter from Finance Minister Olaf Scholz to parliament president Wolfgang Schaeuble.
The German government had received documents from the ECB justifying the programme following the FCC’s request.
Judges gave the German executive and parliament three months’ grace before a threatened ban on allowing the powerful Bundesbank (German central bank) to participate in bond-buying.
The ECB argues it is not subject to the German court’s jurisdiction, and German politicians have been scrambling to comply with the shock ruling.
Without explicitly bowing to the court’s demands, the ECB gave ministers a hand by explicitly discussing the question of “proportionality” that formed the basis of the challenge, in accounts of their June 4 meeting released last week.
There are “sufficient safeguards having been built into the design of these programmes to limit potential adverse side effects,” the account read, describing the €2 trillion (RM9.6 trillion) scheme in place since 2015 as an “effective tool”.
ECB governors also decided to release previously confidential documents to the German government and parliament to prove the bond buying was not excessive, sources close to the ECB told AFP.
“Together with the documents provided, the ECB Governing Council’s decision comprehensively fulfils the demands of the FCC’s May 5 judgement,” Scholz wrote to parliament chief Schaeuble.
His letter was dated June 26 -- the day after the ECB account was published online. — AFP