ECB: Laying the GCC Challenge to Bed

Published on June 24, 2020
SGH Insight
** As the matter remains, from a jurisdictional perspective, a strictly German affair, ECB Governing Council member Jens Weidmann will present a set of documents to Berlin in his capacity as President of the Deutsche Bundesbank. It will demonstrate that the ECB structured and balanced its Public Sector Purchase Program in a manner that fully satisfies the question of “proportionality” that was raised by the GCC in its early May ruling.

** From what we understand, Weidmann’s explanation will be discussed in the late afternoon session of the ECB Governing Council’s non-monetary policy meeting today and is very likely to be “approved.” But with great sensitivity over jurisdictional boundaries and precedent – the ECB reports to the European Parliament and legally answers solely to the Court of Justice of the European Union (CJEU) – a formal ECB decision on any aspect of the GCC challenge is unlikely to ever be taken or published.

** With full cooperation nevertheless of the ECB, Weidmann will present a set of documents to the German Bundestag that will comprise preparatory papers for ECB council meetings, and that may even include older documents dating to the period before January 2015 when the ECB began the practice of publicly releasing its meeting accounts.
Market Validation
Policy Validation

(Reuters 6/24/20)

The European Central Bank agreed to give vital documents to German authorities to prove the proportionality of ECB policies, two sources said, in a step to defuse a challenge threatening to undermine its powers to keep the euro zone together.

In a compromise deal, the ECB agreed on Wednesday to give unpublished documents underpinning its policy decisions to Bundesbank chief Jens Weidmann, who can then present them to the German parliament and government, as demanded by the court ruling.

The sources added that while the documents are unpublished, many were already provided to the European Court of Justice when it discussed and cleared the disputed asset purchase programme, the sources said.

European Central Bank Vice President Luis de Guindos signaled on June 22 that the ECB was ready to cooperate with German “institutions” to resolve yet another legal challenge to the ECB bond buying program from the German Constitutional Court in Karlsruhe.

** As the matter remains, from a jurisdictional perspective, a strictly German affair, ECB Governing Council member Jens Weidmann will present a set of documents to Berlin in his capacity as President of the Deutsche Bundesbank. It will demonstrate that the ECB structured and balanced its Public Sector Purchase Program in a manner that fully satisfies the question of “proportionality” that was raised by the GCC in its early May ruling.

** From what we understand, Weidmann’s explanation will be discussed in the late afternoon session of the ECB Governing Council’s non-monetary policy meeting today and is very likely to be “approved.” But with great sensitivity over jurisdictional boundaries and precedent – the ECB reports to the European Parliament and legally answers solely to the Court of Justice of the European Union (CJEU) – a formal ECB decision on any aspect of the GCC challenge is unlikely to ever be taken or published.

** With full cooperation nevertheless of the ECB, Weidmann will present a set of documents to the German Bundestag that will comprise preparatory papers for ECB council meetings, and that may even include older documents dating to the period before January 2015 when the ECB began the practice of publicly releasing its meeting accounts.

** The Bundestag will start its summer recess in the beginning of July, so the documents will need to be passed along in an expedited fashion, as Karlsruhe gave Berlin three months from the start of May to settle the PSPP issue.

German plaintiffs have already signaled they will now look to challenge the ECB’s new Pandemic Emergency Purchase Program (PEPP). With the jurisdictional issues by now well settled, and the “proportionality” question likely to be soon laid to rest, the ECB and Bundesbank will address that challenge as well when that day comes, years from now.

Back to list