Germany’s highest court faces a legal dilemma if the European Court of Justice follows the opinion of its advocate general and backs ECB bond-buying.
Last year, in a controversial 6:2 ruling, the court said the outright monetary transactions (OMT) programme was “incompatible” with EU law and did “not appear to be covered by the mandate of the European Central Bank”.
Two judges refused to follow this line of thinking and said the matter was a political question for the German government and parliament – beyond the court’s responsibility.
Acknowledging that it had had no competence to rule on EU law, under which the ECB operates, the Karlsruhe judges asked the Luxembourg court for clarity.
After yesterday’s opinion from Luxembourg, the burning question for Germany’s highest court is: what to do after the European court rules on OMT in the autumn?
At this point, the stinging rebuke of OMT by six Karlsruhe judges could come back to haunt them. Last year they said the ECB programme, yet to be activated, bore the hallmarks of illegal economic programme and monetary financing, requiring a tight legal corset and limited firepower.
All eyes are now on Luxembourg to see if the court tries to spare blushes in Karlsruhe by incorporating some of the concerns of their German colleagues in their final ruling.
German constitutional law experts said this was likely, just as it was likely – if not a given – that the ECJ would follow Wednesday's advocate general opinion.
The final OMT ruling in Luxembourg may not be the final word on the matter. When referring the case to Luxembourg, the first such referral in the Karlsruhe court’s history, the German judges said they would wait for the ECJ’s own ruling before delivering their final word on bond-buying.
This is where things could get interesting. While Berlin welcomed the opinion as “fundamentally supportive” of its own thinking, Germany’s eurosceptic Alternative für Deutschland sees things different.
AfD leader Bernd Lucke sees a “grave conflict” on OMT between the ECJ and Karlsruhe.
An economics professor and MEP, Prof Lucke warned that, should the ECJ follow Wednesday's legal opinion, it would "open the opportunity that Germany itself leaves the euro, according to the German constitutional court's case law".
Leading economist Hans-Werner Sinn, president of Munich’s Ifo think-tank and a critic of ECB bond-buying, said the EU advocate general’s arguments “blatantly contradicted” the Karlsruhe judges.
“This is tantamount to a carte blanche for the ECB, provided that it justifies its behaviour,” said Prof Sinn. He predicted an “even bigger constitutional crisis if, as is likely, the court follows the advocate general’s opinion”.
Bavarian politician Peter Gauweiler, whose constitutional complaint to Karlsruhe set events in motion, remains optimistic that the ECJ will step in and impose limits on OMT, which has never been used.
He called on the court to “prove it was a independent court that implements European law even against the competence arrogance of the ECB”.
