ECB to defend bond-buying plan in German courtroom duel
By Stephen Brown
BERLIN (Reuters) - The European Central Bank will defend its bond-buying programme in a German court this week against charges it is really an illegal scheme to fund euro zone members through the back door.
ECB President Mario Draghi has called the scheme "probably the most successful monetary policy measure undertaken in recent time", and it is widely credited with restoring calm to the euro zone by easing fears of a breakup of the currency bloc.
Yet two German ECB policymakers, Bundesbank chief Jens Weidmann and ECB Board member Joerg Asmussen, will take opposing sides in arguing over its legality at the Constitutional Court hearing on Tuesday and Wednesday.
It's hard to argue with Draghi; the euro zone crisis has subsided significantly since he announced the "Outright Monetary Transactions" scheme (OMT) last year, even though the ECB hasn't yet bought a single bond of any distressed euro zone government under the programme.
Still, more than 35,000 Germans have brought a complaint against the OMT, reflecting fatigue in Europe's largest economy at having to fund the lion's share of euro zone rescues.
For Weidmann, who as German central bank president sits on the ECB's Governing Council, the programme is tantamount to printing money to finance struggling euro states. The ECB itself maintains the OMT fits within its mandate of securing price stability.
The court in the southern city of Karlsruhe, which has delivered several high profile verdicts on euro zone bailouts in recent years, is not expected to reach a final ruling on OMT until after a German parliamentary election in September.
But the judges could signal what they think of the programme and whether they feel the case falls within their jurisdiction. Continued...