An Analysis of the OMT Case from an EU Law Perspective

Abstract

On 14 January 2014 the German Constitutional Court (Bundesverfassungsgericht, BVerfG) held a decision to refer for the first time a case to the Court of Justice of the European Union (CJEU) for a preliminary ruling, pursuant to Article 267 of the Treaty on the Functioning of the European Union (TFEU), and addressed to the CJEU a series of questions regarding the compatibility of the Outright Monetary Transactions (OMTs) programme announced by the ECB with EU law.

In this article, it is maintained that the monetary policy transmission mechanism not only allows but sometimes requires a central bank to intervene in the government bonds markets. According to this analysis, the ECB mandate is wide enough to include the implementation of measures such as the OMT.

The subject matter of the case requires a prior understanding of the monetary policy transmission mechanism and the role in this context of government bond markets: paragraph 2 is thus devoted to the attempt to shed some clarity on these highly technical issues, which certainly pertain more to the domain of economics, rather than to that of law. Paragraph 3 and 4 are instead devoted to the analysis of the two questions of law raised by the BVerfG in the present case, relating to the scope of the ECB monetary policy mandate, and to the (alleged infringement of the) prohibition of monetary financing principle. Paragraph 5 concludes.

Keywords: OMT, outright monetary transactions, Bundeverfassunggericthhof, BVerfG, Constitutional identity, CJEU, ECB, Court of Justice, monetary policy