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22 June 2020

FT: Berlin and ECB signal end to legal impasse over bond-buying


German finance minister seeks to reassure constitutional court on flagship policy. Germany’s finance minister has said the stand-off between the country’s highest court and the European Central Bank is about to be resolved “without drama”, adding to signs that a solution could be found.

The ECB is planning to try to defuse the legal impasse with Germany’s constitutional court on Thursday by publishing the official account of its last monetary policy meeting at which it discussed whether its bond-buying had an excessive impact on economic and fiscal policy — the subject of a contentious constitutional ruling last month.

The Karlsruhe-based court shocked Europe when it said that Berlin officials and the EU’s top judges had failed to properly scrutinise the ECB’s €2.2tn sovereign bond-buying programme, in a move that threw the bank’s flagship policy into doubt. The court ordered the German government and parliament to ensure that the ECB provided a “proportionality assessment” of its bond-buying to ascertain whether the “economic and fiscal policy effects” did not outweigh other policy objectives. It also said that if the ECB failed to comply within three months, the Bundesbank must stop buying bonds and plan to sell the more than €500bn it holds.

The growing signs that the ECB and German government are working on a solution to the legal confrontation with the constitutional court have eased fears that the central bank’s bond-buying could be disrupted. Eurozone government bonds rallied on Monday. “This is not a drama without resolution,” said Olaf Scholz, the German finance minister, speaking via video-link to the Frankfurt finance summit on Monday. “We will soon see there will be a resolution without drama.”...

more at FT £



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