In Court, Lawyer Calls E.C.B. Bond Plan ‘an Egregious Extension’ of Powers
In legal news, Europe’s highest appeals court began hearing arguments on Tuesday morning on a suit that aims to block a European Central Bank bond-buying program that has never been deployed — but whose mere announcement two years ago was widely credited with helping rescue the eurozone from market forces that could have destroyed it.
The central bank was seeking approval for “an egregious extension of its powers,” Dietrich Murswiek, a lawyer for one of the plaintiffs, told judges at the Court of Justice of the European Union in Luxembourg. The policy could cost member states “billions of euros,” he said.
The Court of Justice is not expected to rule until next year on the lawsuit, brought by a group of disgruntled Germans. But analysts will be listening closely on Tuesday for indications of how the judges may be thinking about the legal issues.
“The discussion and specifically questions posed by the E.U. judges to the parties involved during the hearing might give some early insight on their views,” Thomas Harjes, an analyst at Barclays, said in a note to investors.
But Germans would never have approved European Union treaties if they had known they would allow the sharing of debt among member states, Mr. Murswiek told the court. He criticized the central bank for viewing “economic expediencies as the only thing worth caring about.”
The mere threat of intervention by the European Central Bank was enough to tame financial markets, and the bank never had to buy any bonds as part of that program.
The suit, brought by a group of university professors as well as about 30,000 citizens who oppose using German funds to prop up the euro, was initially heard by the German constitutional court, which referred it to the Court of Justice of the European Union.
There has been a surge of discontent in Germany toward policies of the European Central Bank. In recent state elections, an anti-euro party, the Alternative for Germany, has been siphoning votes from Chancellor Angela Merkel’s Christian Democrats.
Many Germans fear that they would wind up paying if the European Central Bank buys government bonds from eurozone countries that later default. The central bank has already announced its intention to begin large-scale purchases of private-sector securities, and many analysts expect purchases of government bonds to begin next year.
“What worries me,” Jens Weidmann, the Bundesbank president, said in Bielefeld, Germany, “is the danger that debt securities of poor quality could be purchased. It could also be the case that excessive prices could be paid.”
Source: nyt- In Court, Lawyer Calls E.C.B. Bond Plan ‘an Egregious Extension’ of Powers
