12 June 2013

FT: ECB warns against opening debate on its mandate

A debate about the scope of the ECB's mandate was sparked by two days of legal scrutiny of the its bond-buying plan known as outright monetary transactions (OMT) by Germany's constitutional court in Karlsruhe. Any move to change the ECB's mandate would almost certainly involve a treaty change – a tortuous process likely to provoke alarm in European capitals.

“One should be careful what you wish for”, Jörg Asmussen, the ECB executive board member who represented the bank in court, told the Financial Times. “Wishes for a change to article 123 of the EU treaty can open a Pandora’s box, as there will surely be many wishes regarding the ECB.” He added that the ECB’s mandate was “defined in the EU treaty through democratically elected politicians, we only carry it out”.

Speaking in court, Jens Weidmann, Bundesbank president, did not directly call for treaty change but said his own definition of the mandate was narrow. Asked by presiding judge Andreas Vosskuhle if he thought it would be sensible for the court to demand that the ECB’s mandate were changed to curb its scope of action in policy areas such as OMT, Mr Weidmann indicated that he would. He further questioned whether the ECB’s pledge to use the theoretically “unlimited firepower” that a central bank can summon was compatible with its present mandate.

The court has no direct jurisdiction over the ECB, but it could issue a judgement demanding that the German government seek changes to the ECB’s mandate. An attempt to revise the mandate could trigger more demands to change the way that the ECB operates, especially from other eurozone countries less wedded to the Bundesbank orthodoxy that was used as a model for the ECB when it was established.

Full article

© Financial Times