Germany's Constitutional Court [official website, in German] on Friday referred [text] the case against the European Central Bank's (ECB) [official website] bond-buying plan, called Outright Monetary Transactions (OMT), to the European Court of Justice (ECJ) [official website]. The ruling means the German court will not cut the program, which could alarm investors that rely on the plan to stabilize the Euro. The court stated:
In the view of the Senate, there are important reasons to assume that it exceeds the European Central Bank's monetary policy mandate and thus infringes the powers of the Member States, and that it violates the prohibition of monetary financing of the budget. While the Senate is thus inclined to regard the OMT Decision as an ultra vires act, it also considers it possible that if the OMT Decision were interpreted restrictively in the light of the Treaties, conformity with primary law could be achieved.Germany's Bundesbank brought the lawsuit against the plan, alleging it violated German law. The ECB has no plans to use the OMT in the near future. There is currently no date set for the ECJ to review the OMT, but a full ruling could reported take years.
This is the latest development in the ongoing struggle to maintain stability in the EU. In September, EU parliament approved [JURIST report] a new bank supervisory mechanism. Last November the ECJ ruled [JURIST report] that the eurozone's permanent bailout fund, the European Stability Mechanism (ESM) [official website; BBC backgrounder], is in line with European law. The ruling came following several member states' own courts finding the ESM constitutional under their own laws, including Estonia and Germany [JURIST reports]. Last June the European Commission [official website] announced [JURIST report] a proposal [text, PDF] that would address the problems of bailing out large banks with public funds during financial crises in the future. The proposal rests on Article 114 of the Treaty on the Functioning of the EU (TFEU) [text, PDF] which "allows the adoption of measures for the approximation of national provisions which have as their object the establishment and functioning of the international market."