Paul De Grauwe, Yuemei Ji, 15 January 2015

The ECB has been struggling to implement a programme of quantitative easing (QE) that would successfully target deflation. The main difficulty is political, stemming from opposition from German institutions. Their argument against is that a government bond buying programme by the ECB would mix fiscal and monetary policy. This column argues the opposite – such a programme can be structured so that it does not mix fiscal and monetary policy. It, therefore, would not impose a risk on German taxpayers.

Helmut Siekmann, Volker Wieland, 03 October 2014

In February 2014, the German Federal Constitutional Court declared the Outright Monetary Transactions (OMT) programme to be inconsistent with EU law. However, this did not have a negative impact on the OMT and sovereign risk premia continued to decline. This column argues that the benign response of financial markets may be due to an expectation of a likely compromise between the European and German Courts.

Helmut Siekmann, Volker Wieland, 03 October 2014

The European Central Bank’s announcement of the Outright Monetary Transactions (OMT) program in summer 2012 is widely credited, not least by the ECB itself, as a key factor in the subsequent decline of sovereign risk premia in the Eurozone. Following the February 2014 decision by the German Constitutional Court on the OMT commentators have declared the program “effectively dead”. Nevertheless, financial markets seemingly ignored the decision and sovereign risk premia of Eurozone crisis countries have continued to decline. Policy Insight 74 reviews the legal issues underlying the German Court’s decision and the respective responsibilities of the European Court of Justice. It explores whether likely outcomes of the judicial process would support the benign market reaction to the German Court’s announcement.

Ashoka Mody, 09 September 2014

Earlier this year, the German constitutional court declared the OMT programme to be inconsistent with EU’s law. This column reviews the legal framework and economic foundation of the OMT. Without any changes in the political structure, the OMT invokes moral hazard in the actions of the member states and unfairness in the distributing the burden of distress. 


CEPR Policy Research