FRANKFURT AM MAIN: The European Union’s highest court ruled Tuesday that the European Central Bank’s “quantitative easing” (QE) bond-buying programme is not illegal, rejecting a case by German plaintiffs.
“The PSPP (public sector purchase programme) does not exceed the ECB’s mandate,” the Court of Justice of the European Union (CJEU) said in a press release.
Neither does it constitute “monetary financing”, or direct funding of government spending by the central bank, the judges also found.
While the judgement is a relief for the ECB, it is economically almost moot as the 2.6-trillion euro ($3.0 trillion) scheme is set to end this month.
Both questions had been referred to the CJEU by Germany’s Federal Constitutional Court, which said if either ruling went against the ECB it would have to judge the asset purchase programme illegal.
The plaintiffs, mostly well-known sceptics of the euro single currency, argued the ECB overstepped its mandate when it launched mass purchases of government bonds in 2015 to fight the threat of deflation.
Central bank bosses wanted to push money belonging to investors — mainly banks out of bonds and into lending to the real economy of firms and households, aiming to power growth and indirectly boost inflation.
But German critics have long argued that bond-buying spares spendthrift governments from the discipline of the markets by lowering their borrowing costs.