The European Court of Justice (ECJ), the European Union’s top court on December 11 ruled that the European Central Bank (ECB) decision to buy up the sovereign debt of its own member states in 2015 was valid and within its mandate.
The ruling follows several legal challenges to the measure in Germany.
As reported by Deutsche Welle (DW), Germany’s international broadcaster, the ECB’s policy was an attempt to prop up struggling economies following the sovereign debt difficulties in Greece and several other eurozone members in the aftermath of the 2008’s Great Recession.
The ECB had hoped that by buying government bonds, as part of its wider “quantitative easing” program, it would lower the interest rates faced by heavily-indebted members that were struggling to borrow more money at competitive rates on the markets.
According to the Luxembourg-based EU court, the programme “does not exceed the ECB’s mandate” and that “the programme falls within the area of monetary policy, in respect of which the EU has exclusive competence for the member states whose currency is the euro, and observes the principle of proportionality”.
“To exert an influence on inflation rates, the ESCB (European System of Central Banks) necessarily has to adopt measures that have certain effects on the real economy,” the court said.
The court also ruled that preventing the ECB and national central banks from buying bonds “might — in particular in the context of an economic crisis entailing a risk of deflation — represent an insurmountable obstacle to its accomplishing the task assigned to it” of maintaining price stability.