Whatever it takes: ECB’s Mandate of Purchasing Government Bonds on Secondary Markets

Sammanfattning: When the European debt crisis struck the eurozone in late 2009, the European Central Bank (ECB) played a vital role to mitigate the economic situation. In 2012, the ECB announced the introduction of Outright Monetary Transactions (OMT), a government bond buying programme. In 2015, the ECB introduced the Public Sector Purchase Programme (PSPP), a quantitative easing programme similar to the OMT. In 2014 and 2017 respectively, both programmes were challenged at the Federal Constitutional Court in Germany, which referred both cases to the Court of Justice of the European Union (CJEU). The complainers argued that both programmes were, in fact, monetary financing, which is forbidden by TFEU, and ultra vires acts by the ECB. The CJEU concluded that neither the OMT programme nor the PSPP was monetary financing or an ultra vires act. This paper will analyse both cases in order to understand when purchases, by the ECB, of government bonds on secondary markets are not regarded as monetary financing, and where the line between monetary and economic policy goes according to the TFEU. The purpose of this is to understand which measures the ECB is permitted to take in the event of a future crisis. The methodology used is primarily the methodology of EU law: putting gravity in CJEU cases and principle when interpreting the Treaties. The paper shows that the ECB must put up safeguards with to remove the foreseeability of which bonds the ECB will purchase, when it will purchase them, and the size of the purchase volume. Furthermore, to tell a monetary policy measure from an economic measure, the objective of the measure and the instruments used must be monetary. Lastly, the principle of proportionality plays a vital part in concluding if enough safeguards have been put up. For instance, a severe economic situation justifies fewer safeguards.