The ECB in the sights of businessmen in Germany

The ECB had better watch out. Unhappy with the emergency program launched in March 2020 by the monetary authority in the face of the Covid-19 crisis, 16 businessmen and academics appealed to the German Constitutional Court. This aid, taking the form of massive buybacks of mainly public debt, under the name of “PEPP”, is “a blatant case of illegal public financing” of states, says Markus Kerber, professor of economics at TU University of Berlin and at the head of the group of applicants, in a statement. The European treaties prohibit the ECB from helping the direct financing of governments in the euro zone by resorting to “printing money”.

This program of support for the economy must be confirmed Thursday by the ECB at the end of its monetary policy meeting, covering an envelope of 1.850 billion euros to be committed by March 2022. The request against the program PEPP was filed on March 8 in the Karlsruhe Court, a spokesperson confirmed to AFP. By deciding a year ago to use this weapon intended to curb the negative impact on economies linked to the pandemic, the ECB has “definitively left its framework of expertise”, adds Mr. Kerber.

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The latter had already dragged the institution guardian of the euro before the German supreme judge in two similar cases already judged and related to the unlimited debt buybacks (OMT) launched in 2012 in the face of the debt crisis, then last year on quantitative easing or “QE” dating from 2015 to remove the specter of deflation in the euro zone.

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The German Supreme Court will now examine the admissibility of this request, without giving any time horizon. In the judgment on the “QE” of May 2020, which left aside the “PEPP” barely starting, the judges had caused a sensation by giving three months to the ECB to justify its buybacks of public debt by billions, since they came out of its strict role of controlling interest rates.

This warning shot, which has since been resolved, posed a temporary threat to the ECB’s support programs for the euro zone and to the future of the single currency as a whole. In the same judgment, the judges affirmed that debt buybacks under any program should have limits, only concern securities with minimum financial ratings and respect the key to the distribution of countries in the capital of the ECB.

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