The European Central Bank has returned to Germany’s highest court to defend its Outright Monetary Transactions (OMT) bond-buying programme, announced four years ago to stabilise the euro zone.

The hearing arose after 37,000 people complained to Germany’s highest court, arguing the 2012 programme amounted to illegal monetary financing – a breach of the ECB mandate.

Though the OMT plan remains dormant, superseded by the larger quantitative easing programme, German critics stepped up their attacks on the ECB and its activities yesterday.

One described the ECB as a “sovereign, financial dictator”. Another dubbed OMT a “brazen attempt” by the Frankfurt bank to muscle in on competences of member states, spreading financial risk and turning the monetary union into a “liability union”.

Limited risk

ECB governing council member Yves Mersch agreed with the bank’s critics that the currency union was a liability union. But he insisted risk was limited, as was the OMT buy- up volume, and that it was an appropriate reaction to an “extraordinary crisis situation”.

The 2012 crisis situation was characterised by “massive distortions of the government bond market that developed their own momentum”, he said, leading to a “disruption of the monetary policy transmission mechanism, which posed a threat for price stability”. The ECB “did not exceed its monetary policy mandate”, he said, and took measures to avoid “excessive non-payment risks”.

Also defending the ECB plan, Germany deputy federal finance minister Jens Spahn said he had “doubts as to whether it would ever come to an OMT programme”.

The long-running case over a non-active bond programme has symbolic value, dubbed yesterday the “end game” in a long-running battle of wills between Germany’s highest court in Karlsruhe and Europe’s highest court, the European Court of Justice (ECJ), in Luxembourg.

In their 2013 OMT hearing the Karlsruhe judges deferred to the ECJ but, in their preliminary hearing, a 6:2 majority said they viewed the programme as “incompatible” with EU law and out of step with the ECB mandate.

Last year the ECJ disagreed and backed the Frankfurt central bank, leaving Karlsruhe court with limited legal wriggle room in its final ruling.

Despite the ECJ green light for the programme, Karlsruhe judges appeared to have retained their critical view of ECB crisis-era activities.