This is the first occasion that a national court has declared an ECJ judgment invalid, and the ruling could therefore pose a threat to any uniform application of European Union law in future.
When Mario Draghi declared in 2012 that the European Central Bank would do “whatever it takes to preserve the euro,” the markets believed him, and it worked. But things could be very different for Christine Lagarde, his successor as ECB president.
Germany’s constitutional court ruled last month that the ECB overstepped its mandate by buying up nearly €2 trillion ($2.2. trillion) of assets—mainly government bonds—over the previous five years, on the grounds that the bank’s interventions were not “proportional.”
The ruling poses a challenge not only to the ECB’s independence but to the supremacy of the European Court of Justice, which already ruled, in 2018, that the bank’s bond-buying was legal. This is the first occasion that a national court has declared an ECJ judgment invalid, and the ruling could therefore pose a threat to any uniform application of European Union law in future.
The German court’s authority cannot directly restrict the actions of ECB, which as an EU institution is answerable only to the ECJ. But its decision is legally binding on the Bundesbank and requires that after three months the German central bank cease participating in ECB bond purchases unless it can prove to the court that they are proportional. Observers see the ruling as the thin edge of the wedge, undermining both the ECB’s ability to mitigate the current economic crisis and, indeed, the legal basis of the entire EU. Others predict that by bringing the matter to a head, it will provide greater clarity on some key issues.
Among these are whether to stop relying largely on quantitative easing by the ECB to solve Europe’s economic problems—or kick them further down the road. Lagarde has called for more fiscal stimulus, which may now be forthcoming with the joint Franco-German call for €500 billion in EU grants to countries and sectors worst hit by Covid-19.
Yannis Stournaras, governor of the Bank of Greece and a member of the ECB’s governing council, expresses confidence that Germany will satisfy the constitutional court. “I think this decision will lead to others,” he says, “which will ultimately help with closer European integration.”
