Merkel Lawmakers Praise Proposed ECB Bond-Buying Limits

Lawmakers from Chancellor Angela Merkel’s party welcomed a court recommendation to set conditions on the European Central Bank’s bond-buying plan, suggesting the legal opinion addresses German concerns.

The Outright Monetary Transactions program that ECB President Mario Draghi pushed through in 2012 won a legal endorsement today by Advocate General Pedro Cruz Villalon of the European Court of Justice, which took on the case after Germany’s constitutional court questioned OMT’s legality.

“We welcome that the buying would have to be well-reasoned and have a sense of proportion,” Ralph Brinkhaus, finance spokesman in parliament for Merkel’s Christian Democratic Union, said in an e-mailed reply to questions.

Easing German concern that crisis-ridden euro countries may rely too much on ECB assistance became more critical after Draghi pledged in July 2012 he would do “whatever it takes” to save the euro. Merkel said in Berlin that she will study the opinion “in all its complexity” before commenting publicly.

The European court mostly follows the advocate-general’s non-binding opinions. If that happens in the OMT case, the ECB’s obligation to justify bond purchases “at least allows retroactive control,” said Heribert Hirte, a CDU legislator and law professor who represented Germany’s lower house of parliament in the ECJ’s hearings.

“The dispute over the borderline between monetary and fiscal policy has been clarified,” provided it follows Cruz Villalon’s conclusions, he said. “There’s no room anymore for a different assessment by the Federal Constitutional Court or some German economics professors.”

German Plaintiff

Draghi’s bond-buying program, which has never been used, should count as a monetary-policy measure if the ECB refrains from direct involvement in financial aid programs by the euro region’s financial rescue funds, according to Cruz Villalon.

That means the ECB would have to leave the so-called troika of international bailout creditors if it uses the program, Peter Gauweiler, a lawmaker in Merkel’s bloc who’s a plaintiff against the OMT program, told the Handelsblatt newspaper. The other members are the European Commission and the International Monetary Fund.

Germany’s lower house of parliament has the power to block the country’s contributions to aid programs in the euro area. Norbert Barthle, the CDU’s budget spokesman in parliament, said last May the Bundestag would have “major concerns” about joining any OMT measures.

A 15-judge panel at the EU court is expected to give its final decision on the OMT case in about four to six months. opinion.

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