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German ruling on ECB monetary policy symbolic

Bond purchases not endangered by court decision, says DWS


Elena Johansson

The chief investment officer of DWS, Stefan Kreuzkamp, has commented that he does not expect any bigger changes to EU monetary policy, following a German court ruling.

“We do not see any immediate impact on the European Central Bank’s (ECB’s) bond purchases. The ruling is likely to change little in the short-term monetary policy of the Eurozone,” he said.


Germany’s Federal Constitutional Court criticised the ECB for exceeding its powers with its bond purchase programme.

It also took aim at the Court of Justice of the European Union (CJEU) for not having taken a clearer stance.

The Constitutional Court also claimed that the Federal Government and the German Bundestag had not assessed whether the adoption and implementation of the Public Sector Purchase Programme (PSPP) satisfy the principle of proportionality.

The court ruled that the ECB has three months to demonstrate that the PSPP respects proportionality and conforms with EU law. If it fails to do so, the German central bank may no longer be allowed to participate in the bond purchase programme.

Kreuzkamp interpreted the ruling as saying: “We are displeased, but allow the programme to carry on, provided it is better explained.”

DWS viewpoint

“We expect no opposition from the Bundesbank, and further expansionary monetary policy,” he said.

The ruling relates to the PSPP launched in March 2015 and not to the current Pandemic Emergency Purchase Programme (PEPP), Kreuzkamp explained.

More importantly, the ruling does not have much weight because of the court’s negligible demand, which means that “the problem could, essentially, be solved if the ECB were to explain the proportionality of its actions in more detail”.

“We believe the ECB should therefore be able to live with this judgement without much difficulty, especially as the German Federal Constitutional Court has, perhaps deliberately, remained vague enough on many points to spare the ECB from any loss of face and to allow it sufficient room to manoeuvre,” he noted.


The ECB commented: “The governing council remains fully committed to doing everything necessary within its mandate to ensure that inflation rises to levels consistent with its medium-term aim and that the monetary policy action taken in pursuit of the objective of maintaining price stability is transmitted to all parts of the economy and to all jurisdictions of the euro area.”

Mark Dowding, chief investment officer at BlueBay Asset Management, said: “In many respects, this outcome can be viewed as more symbolic than substantive, with the most concerning element being a national court adopting a position in contradiction to the CJEU.

“The ECB itself won’t be bound by the German constitutional court, though its ruling could serve to embolden hawks on the committee and lead to fears that it won’t be in a position to deliver on its claim to do ‘whatever it takes’.”