ALLIANCE FO§ DEMOCRACY

Purchase of junk government bonds by the ECB

Art 123 I of the TFEU states: The ECB may not grant loans to member states. The ECB may also not acquire debt instruments of member states directly. The word "directly" is the magic password for the current practice of the ECB: It is not buying up the bonds direct from the member states, but acquiring them on the secondary market. This is not prohibited according to the strict wording, because Art. 123 TFEU is a regulation with more holes in it than a Swiss cheese.
Legal specialists conclude from this by means of argumentum e contrario: If direct acquisition is prohibited, then indirect acquisition on the secondary market must be permissible. The argumentum e contrario is the weakest argument amongst legal debating skills, but the fact still remains: The TFEU contains no express prohibition.

There remains the more general, fundamental question of whether the actions of the ECB conform to the sense and purpose of the tasks assigned to it. This question represents a departure from the purely legal terrain, because according to Art. 127 TFEU, the primary objective of the ECB is to preserve price stability. The ECB is thereby also supposed to support the general economic policy of the European Union – by preserving the priority objective of price stability.

Now the question arises of whether the purchase of junk government bonds is or can ever be compatible with the objective of price stability. Many arguments can be put forward for and against. Pro: the endangered member states are stabilised in this way, with positive consequences for overall price stability. Contra: the money supply is inflated, and good money thrown after bad. This dispute cannot be resolved on a purely legal basis. This means that for any legal review, a court would simply hold back and defer to the freedom of discretion of politics and the ECB. The situation is therefore clear in legal terms. There are no legal proceedings which could be instituted by the Alliance for Democracy. The so-called individual effect or concern required under applicable process law is lacking, which can be explained as follows particularly in relation to the authority of private persons to bring legal actions against EU acts of law.

However, other than the member states with regard to their budget policy, the ECB is not removed from all legal control. According to Art. 263 AEUV, the ECJ also monitors the legality of the legal actions of the ECB. In order to bring about a legal review, this requires an application by a member state, the European Parliament, the Council or the Commission.

Although such a case would be impossible to win, Prof. Markus Kerber (Europolis) tried to bring a complaint against the ECB; these efforts were joined by a member of the European Parliament, Derk Jan Eppink. The action has little prospect of success, since neither Prof. Kerber nor Derk Jan Eppink are 'individually affected'; in any case however, it is a slap in the face for the policy of the ECB.