New IMFS Study on the ECB's OMT in the Courts

On the occasion of the European Court of Justice (ECJ)'s Advocate General summing up of the Outright Monetary Transactions (OMT) case on January 14, this new issue in the series IMFS Interdisciplinary Studies compiles selected contributions to the IMFS Conference on "The Economic and Legal Limits of Central Banking" in an updated version. According to Advocate General Cruz Villalon's view, the OMT program "does not infringe the principle of proportionality and may be considered lawful".

At the same time, the crisis in the euro area is back on the agenda amid investor concerns about Greece leaving the currency union and speculation about the European Central Bank moving closer to large-scale sovereign-bond purchases.

In the opening article, Helmut Siekmann and Volker Wieland explore the legal implications of the German Court's announcement of referring the OMT case to the ECJ as well as the respective responsibilities of the German and the European Court.

Dr. Avv. Antonio Luca Riso provides an analysis of the OMT case from an EU law perspective arguing that the monetary policy transmission mechanism not only allows but sometimes requires a central bank to intervene in the government bond markets. According to this analysis, the ECB mandate is wide enough to include the implementation of measures such as the OMT. The views expressed in this article are those of the author and do not necessarily represent those of the ECB or the Eurosystem.

On the other hand, Christoph Degenhart, Professor of Law at the University of Leipzig, comes to the conclusion that the unlimited purchase of government bonds of individual euro zone countries extends the remit assigned to the ECB up to the legally admissible limit and beyond.

Following these legal considerations, Harald Uhlig, from the University of Chicago, investigates if and when the ECB policy of buying government bonds amounts to a bailout, pointing out that ECB policies in general, and the OMT in particular, lack democratic control. According to Uhlig, there is a "dramatic democratic legitimacy vacuum concerning the powers available to the ECB".


The speeches of the authors at the IMFS Conference on "The Economic and Legal Limits of Central Banking" are available as videos.

The study "The ECB's Outright Monetary Transactions in the Courts" is available for download (PDF, 2,6 MB).