The agency intends to continue its repurchase program of hundreds of billions of euros of public debt to support the fragile economy of the euro area.

The european central Bank reaffirmed on Tuesday evening wanting to do everything to assist in pulling the eurozone out of the crisis, in spite of the remonstrances of severe German court which laid down an ultimatum. Following a meeting convened in emergency of its governing body, it said “take note” of the judgment rendered on the same day by the German constitutional Court, which was highly critical of the policy of support to the economy of the monetary institute in Frankfurt.

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But at the same time, the ECB says it will do “everything necessary in the framework of its mandate” in order to fulfill its mission, namely to maintain a certain level of inflation and ensure that its decisions are well-communicated to the economic circuit. A way of signifying that it intends to continue, as it has undertaken massively since 2015, his program of redemption of hundreds of billions of euros of public debt to support the fragile economy of the euro area. An economy that has sunk into a recession of historic proportions because of the impact of the outbreak of coronavirus.

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Arm wrestling

In addition, in the arm of iron between the magistrates germans and europeans about the boundaries of the mandate of the ECB, the latter has clearly positioned itself in the camp of the latter. It has argued in its statement that the european Court of justice had validated it, its policy in December 2018. The German constitutional Court, the highest court in the country, has sent you this Tuesday, a warning shot of an intensity unprecedented in the institute of Frankfurt.

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She was urged to justify “in three months” its purchases of public debt, weakening its broad support to the economy in full pandemic. The ECB shall establish by the month of August, so as “understandable and comprehensive”, that the positive effects of its program outweigh its drawbacks.

by default, the German central bank, the powerful Bundesbank, will be prohibited from participation in the redemption of the public debt, thus depriving the support plans of the ECB to a large part of its effectiveness. This stop resounding, in the form of a challenge to the european institutions, is coming at a time when the institute of Frankfurt is reinforcing its action in the face of the consequences of the health crisis. The political impact could be significant strengthening in Europe the camp of the skeptics with respect to the policy of “easy money” is deployed by the ECB.

“Limits”

German chancellor Angela Merkel has ruled during a closed-door meeting on Tuesday with its members that the judges had shown the central bank to the limits of what she could do, said one participant, under the guise of anonymity.

The ECB is regularly accused in Germany to go beyond its prerogatives in helping the States of the euro zone, the most fragile in Southern Europe in particular, through its funding. For the German supreme Court, buying back massive public debt the ECB’s adventure on the ground, “economic policy,” outside of its strict monetary policy of ensuring a certain level of inflation.

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The ECB has injected about 2,600 billion euros on the market between march 2015 and December 2018, of which nearly 2,200 billion were used to redeem the bonds, in the framework of its instrument of quantitative easing or “QE”. It was reactivated in November last year and still muscular lately. In particular, the German judges refuse to bend to the opinion of the european Court of justice, to the end of 2018. It was according to them “totally ignored” the “economic consequences” of support plans.

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This massive injection of liquidity affects, in fact, “almost all citizens”, as “shareholders, owners, tenants, investors or holders of insurance policies”, leading to “huge losses for the private savings,” commented the Court, in quoting his account of the critical recurrent heard in Germany. The european Commission, like the ECB, reaffirmed “the primacy of community law and the fact that the judgments of the european Court of justice are binding for all national courts”.