German Court Ruling on ECB Asset Purchases: FT

The German constitutional court ruled against the European Central Bank’s public sector purchase program, launched in 2015. Martin Wolf argues for the Financial Times that the move contributes to EU disintegration: “It is an attack on basic economics, the central bank’s integrity, its independence and the legal order of the EU…. The court “did not argue that the ECB had improperly engaged in monetary financing, but rather that it had failed to apply a 'proportionality’ analysis, when assessing the impact of its policies, on a litany of conservative concerns: ‘public debt, personal savings, pension and retirement schemes, real estate prices and the keeping afloat of economically unviable companies.’” A primary ECB goal is price stability and inflation control. As governments around the world, led by the United States, organize asset purchase to shield economies and jobs, the ruling blocks German banks from participation without the ECB proportionality assessment. Germany, rejecting a ruling from the European Court of Justice, backtracks on independent policy from the ECB. The German court also limits debt holdings of any member country to 33 percent of the outstanding total and expects asset purchases be allocated according to member states’ ECB shares. Germany under Angela Merkel has resisted more integration. The economic crisis unfolding from the Covid-19 pandemic requires targeted coordination and efficient spending with limited resources. – YaleGlobal