Mai 11, 2020

Focal Point: German CC ruling: How much pain for the ECB?

Share on facebook
Share on twitter
Share on linkedin
Share on email

In Kürze

The German Constitutional Court (CC) judged the ECB’s Public Sector Purchase Program (PSPP) as partly unlawful as the German parliament did not demand a justification of it by the ECB but also ruled that it was no state financing.
Focal Point: German CC ruling: How much pain for the ECB?
Share on facebook
Share on twitter
Share on linkedin
Share on email

Highlights:

  • The German Constitutional Court (CC) judged the ECB’s Public Sector Purchase Program (PSPP) as partly unlawful as the German parliament did not demand a justification of it by the ECB but also ruled that it was no state financing.
  • While a formal proof by the ECB that the PSPP is needed could easily allow the Bundesbank to proceed participating in the PSPP, the criteria for state financing will limit the ECB’s future policy leeway significantly.
  • There will be additional stress on the functioning of EMU, damage to the ECJ and likely be a headwind for the application of EU law in critical circumstances, e.g. Hungary. But if the threat to EMU becomes threatening, deeper integration could follow.
  • European government bond markets reacted with a modest spread widening to the ruling. As the immediate consequences are likely to remain limited, we do not expect a disproportionate market reaction in the near term. But the reduced ECB flexibility and the additional layer of uncertainty justify a slightly higher risk premium for the time being.

Read the full publication below.

Focal Point: German CC ruling: How much pain for the ECB?

RELATED INSIGHTS

Marktkompass Juli 2021
Herausgegeben vom Macro & Market Research Team. Ein Team von Analysten mit Sitz in Paris, Köln, Triest, Mailand und Prag analysiert qualitativ und quantitativ makroökonomische und finanzielle Fragen. Das Team überträgt makroökonomische und quantitative Ausblicke in Anlageideen, die in den Anlageprozess einfließen.
Market Compass July 2021
Edited by the Macro & Market Research Team. The team of analysts based in Paris, Cologne, Trieste, Milan and Prague runs qualitative and quantitative analysis on macroeconomic and financial issues.

The team translates macro and quant views into investment ideas that feed into the investment process.
Market Compass June 2021
Edited by the Macro & Market Research Team. The team of analysts based in Paris, Cologne, Trieste, Milan and Prague runs qualitative and quantitative analysis on macroeconomic and financial issues.

The team translates macro and quant views into investment ideas that feed into the investment process.

Also interesting

EU flag green
July 26, 2021
Focal Point

ECB greening of the credit market to start in 2022

triple peak
July 23, 2021
Market Perspective

Market Perspectives ǀ Overfretting about the triple peak

European-Central-Bank-in-Frankfurt_web
July 22, 2021
Market Commentaries

ECB sends a dovish message as new strategy increases threshold for raising rates