16. Juni 2015

Association of German Banks: Despite the ECJ ruling on OMT, risks should not be underestimated

Michael Kemmer, General Manager of the Association of German Banks, on today’s ruling by the European Court of Justice (ECJ) on the OMT programme:

“The ECJ has decided today that the European Central Bank (ECB) can buy government bonds under its OMT programme. This gives the German Constitutional Court, which has until now reserved judgement on the challenge to the OMT programme, a basis for a final decision. Europe’s most senior judges have made it clear that, in their view, the programme neither exceeds the powers of the ECB in relation to monetary policy nor contravenes the prohibition of monetary financing of member states. But just because something is legally permissible, it doesn’t necessarily mean it makes good economic sense. The ECB does not now automatically have to launch an OMT programme.

In addition, the ruling has no direct effect on the ECB’s current purchasing programme, under which it is buying government bonds from eurozone countries. For this reason, it remains our view that the risks of a government bond purchasing programme should not be underestimated. There is a danger, for instance, of bubbles being created in asset markets. Nor should it be overlooked that efforts in the eurozone to deliver economic policy reform have stalled. The fact is that, until the climate for investment in Europe improves, we will see no further increase in the demand for loans. There is therefore no alternative to economic structural reform.”

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