German opposition to the European Central Bank’s bond-buying programme known as the outright monetary transaction (OMT) will be thrashed out today during a hearing at the European Court of Justice, though a final judgment is at least a year away.
The Luxembourg court will hear testimony related to the case, which was originally brought by a German conservative politician, questioning the legal basis of the bank's OMT programme.
Earlier this year, the German constitutional court ruled the OMT should be considered illegal under European law, unless restrictions were imposed, though it referred the case to the European Court of Justice.
Sovereign debt
ECB president
Mario Draghi
announced the OMT programme a little over two years ago. It has widely been credited with calming sovereign debt markets, even though the plan to buy the debt of euro zone countries which were part of a specific programme has never been deployed.
While today’s hearing will give an insight into the court’s thinking, it could also have implications for the legality of the ECB’s recently announced asset-backed security purchase programme and any full-scale quantitative easing programme that would involve the purchase of government debt.
In February, Germany's constitutional court a suggested the bond-buying programme could violate the ECB's monetary financing rules. German Bundesbank chief Jens Weidman earlier this month criticised the ECB's plan to buy private sector bonds. The European court typically takes 16 months to rule on matters referred by national courts.
