Four governing council members warn of risk to central bank independence
The European Central Bank is expected to resist pressure from Germany’s constitutional court for it to produce a justification of its massive purchases of government bonds, according to several members of its governing council.
Four ECB council members told the Financial Times on Wednesday that they were determined it should not respond directly to the German court, arguing such a move would impinge on the central bank’s independence and expose it to pressure from other national courts. A majority of ECB council members oppose giving a response, they said.
The constitutional court in Karlsruhe on Tuesday ordered the German government to ensure the ECB carried out a “proportionality assessment” of its purchases of government bonds to ensure their “economic and fiscal policy effects” did not outweigh other policy objectives. It threatened to prevent the Bundesbank, Germany’s central bank, from making further asset purchases if the ECB failed to comply within three months.
The German court stunned lawyers and legal scholars by partially rejecting a 2018 ruling by the European Court of Justice that ECB bond buying was legal. According to legal scholars it was the first time a national court had declared an ECJ judgment invalid and could undermine the uniform application of EU law, one of the bloc’s most important achievements.
“The court’s arguments are ridiculous and we could easily answer them in five minutes, but we absolutely should not do so,” said one member of the ECB council, who added that this view was shared by the 24 other members of the bank’s top decision-making body who held a conference call on Tuesday evening to discuss the judgment.
“What is the risk if we reply?” the council member asked. “When the time comes to raise interest rates, another court in a different country will challenge us — then what?”
“In my view we should not prepare any special response for the German court,” said a second ECB council member.
A third ECB council member said the German court ruling appeared to ignore vast amounts of analysis the central bank has done on the impact of its bond-buying, adding that during Tuesday evening’s call the idea was floated of highlighting the relevant documents on its website.
“As I understand it the respondents in the case, and the ones the court has addressed its order to, are the German government and parliament,” said one ECB council member. “We are going to carry on doing what we are doing. You are not going to get a formal response from the ECB.”
The ECB has not yet officially decided whether to respond to the German court, and a spokesperson declined to comment.
Several ECB council members suggested that the Bundesbank could provide a proportionality assessment for its own national government or parliament instead, according to several of those who attended the meeting.
“The Bundesbank can reply to this through the finance ministry in Berlin,” said the first council member.
That would put Jens Weidmann, president of the Bundesbank and a member of the ECB governing council, in the awkward position of having to justify the ECB’s €2.2tn purchases of public sector bonds over the past five years despite having been one of the policy’s most vocal opponents on the council. The Bundesbank declined to comment.
The second council member said Mr Weidmann was “in a very difficult situation because he is caught between the constitutional court of his own country and the governing council of the ECB of which he is a member”.
“I would not be surprised if [German chancellor Angela] Merkel does not intervene at some point to resolve it,” said the council member.
Several senior European political leaders have spoken out in defence of the ECB’s independence and said it was only answerable to the ECJ, not to national judges.
“It is not for any constitutional court to decide what the ECB can or cannot do,” Guiseppe Conte, Italy’s prime minister, told the Il Fatto Quotidiano newspaper on Wednesday.
France’s finance minister Bruno Le Maire said the ECB “takes its decisions independently and decides on the conditions for the exercise of its mandate under the exclusive control of the ECJ”.