Top German Court Says ECB Bond Buying Scheme Partially Contravenes the Law

The billion-dollar purchase of government bonds by the European Central Bank (ECB) partially violates the German Basic Law. The Federal Constitutional Court justified the decision on Tuesday in Karlsruhe, saying that the Federal Government and the Bundestag had not examined the ECB’s decisions.

With the decision announced by President Andreas Vobkuhle, several constitutional complaints were partially successful. According to the ruling, the Bundesbank is prohibited from participating in the implementation of the ECB’s purchase program after a transition period of three months at most – unless the Governing Council of the ECB clearly explains in a new decision that the program is proportional. The judgment is not about the central bank’s latest support programs in the wake of the corona crisis, but about bond purchases in recent years.

“Due to their responsibility for integration, the Federal Government and the German Bundestag are obliged to oppose the previous handling of the PSPP (the ECB purchase program)”, the Karlsruhe judges stated (here are the guiding principles of the judgment on the side of the Federal Constitutional Court). The Deutsche Bundesbank is the largest shareholder in the ECB with just over 26 percent. Their purchase volume is correspondingly large.

In addition, the Federal Constitutional Court declared a decision of the European Court of Justice (ECJ) from December 2018 on the ECB’s purchase program to be non-binding. The ECJ had approved the ECB program in all respects. This preliminary decision from Luxembourg was “absolutely no longer comprehensible”, it now said in the decision of the German constitutional judges.

However, once the tensions between China and the United States have been put aside for the moment, investors try to focus on news of the reopening of activities and production in many countries, from California to Italy, including the announcement of the partial reopening of New York ten days from here. In the meantime, Wall Street goes up a percentage point. These confirm previous earnings, after the data on the trade deficit and as the quarterly season continues.

German court confirms Qe legality, but with conditions for Bundesbank
The German Constitutional Court has confirmed that the ECB’s public securities purchase program, or QE, respects the federal laws of Germany. The decision also shelters the € 750 billion pandemic purchase program launched by the ECB on March 18 to counter the impact of the coronavirus on the Eurozone economy. However, the Court ruled that the ECB has three months to demonstrate that the monetary policy objectives pursued by the government bond purchase program are not disproportionate to the fiscal and economic policy effects of the program.

EU Commission: EU Court decisions binding on countries

“We reaffirm the pre-eminence of EU laws and the fact that the decisions of the EU Court of Justice are binding on all national courts”. This is the European Commission’s comment on the judgment of the German Federal Constitutional Court on the ECB’s Qe. The Commission did not want to add anything else or even clarify what are the formal steps to manage the situation that could arise if the German Court were to judge the arguments of the European Central Bank insufficient within three months as insufficient.

In Milan, Ferrari down which yields about 2% after the cut of the estimates for 2020 that had not affected the rise in the stock on May 4. The purchases reward Tenaris, with the rise in crude oil for the fifth consecutive session, Saipem and Eni. Campari slides to the bottom of the list while the first indications on the trend of the first quarter arrive which saw the first quarter gross profit halved. The forecasts for the coming months are not comforting either. Intesa Sanpaolo rises in the wake of the indications for the quarter: in particular, the profit target for 2020 is reduced to 3 billion euros but the group has confirmed the indications of the plan on payout and Cet1.

Fiat Chrylser, which was among the best in Piazza Affari, then folded after the first quarter accounts, eliminating earnings, then went back up more than one point. The period ended with a net loss of 1.7 billion, revenues down 16% to 20.5 billion and deliveries down 21%. In addition, the new 2020 guidance has been postponed until there is greater visibility into the fallout from the coronavirus pandemic. Having said that, the company reiterated