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German Federal Constitutional Court ./. ECB and ECJ

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07 May 2020

German court rulings rarely find their way into international newspapers – but this one is different: In times of "corona bond"-discussions and further increased bond acquisition programmes of the European Central Bank (ECB), the German Federal Constitutional Court (BundesverfassungsgerichtBVerfG), in its ruling of 5 May 2020, had to decide about constitutional claims arguing against the lawfulness of bond acquisition programmes of the ECB.

And indeed, the BVerfG decided that, in its view, the ECB had exceeded the powers conferred to it by the Treaties of the European Union when adopting the Public Sector Asset Purchase Programme (PSPP) by ignoring the economic consequences of the programme and had therefore not sufficiently examined its proportionality. In light of this assessment, the German Federal Government and the German Parliament (Bundestag), in the view of the BVerfG, would have needed to take action against the PSPP; by not doing so, they have violated fundamental rights. According to the BVerfG, the ruling of the Court of Justice of the European Union (CJEU) previously handed down on the same matter which confirmed the lawfulness of the PSPP does not stand in the way of the BVerfG's decision, as it was not comprehensible with regard to the proportionality test and had thus been itself ultra vires. In light of the relevance of the ruling for the asset purchase programmes of the ECB and, hence, the market developments and the potential wider consequences for the EU as such, this bulletin outlines the background of the ruling, summarises key statements and tries to identify consequences and potential developments.