IMFS Professors analyze judgment on ECB bond purchase programs

Germany's Federal Constitutional Court has ruled that the European Central Bank's mass bond-buying to stabilize the eurozone partly violates the German constitution. The Court in Karlsruhe says there is not enough German political oversight in the PSPP purchases. IMFS Professors have analyzed the ECB bond purchase programs in various papers.

In a new research paper, Prof. Helmut Siekmann and Prof. Volker Wieland investigate the options of the ECB after the decision of the German Constitutional Court. According to this paper, the ECB could meet the requirements of the Constitutional Court by taking them into account during its strategy review. The Neue Zürcher Zeitung describes the suggested compromise by the IMFS Professors.

As an expert witness in the PSPP case at the Federal Constitutional Court Wieland had argued that it was monetary policy and that the bond purchases could be viewed as proportionate. However, bond purchases were not absolutely necessary, he said in an interview with "Frankfurter Allgemeine Zeitung" (FAZ). In an interview with CNBC he focused on the proportionality of the ECB's bond buying under the PSPP program. The ECB can easily comply with the conditions of the Federal Constitutional Court's verdict, Wieland said in an interview with FAZ after the decision.

In an interview with "Süddeutsche Zeitung", Wieland also referred to the ECB's discretionary powers which call for an explanation. "As I understand the verdict the proportionality has to be explained in the decisions published by the Governing Council," he said. Speeches and press conferences were not sufficient in the court's view.

Prof. Helmut Siekmann has analyzed various bond-buying programs in an IMFS Working Paper. In some cases, he is skeptical about them being classified as monetary policy without constraints.

Prof. Helmut Siekmann and Prof. Volker Wieland
"The Ruling of the Federal Constitutional Court concerning the Public Sector Purchase Program: A Practical Way Forward"
IMFS Working Paper 140

Prof. Volker Wieland
"Verfahren zum Anleihekaufprogramm der EZB"
IMFS Working Paper 139

Prof. Helmut Siekmann
"The Asset Purchase Programmes of the ESCB - an interdisciplinary evaluation"
IMFS Working Paper 134