Merkel Vows to Work Toward Strong Euro Amid Court-Ruling Fallout
Merkel Vows to Work Toward Strong Euro Amid Court-Ruling Fallout
(Bloomberg) --
Chancellor Angela Merkel vowed to defend the euro as she seeks to resolve concerns over the currency’s stability after Germany’s highest court questioned one of the European Central Bank’s key policy tools.
The German leader aims to ensure the Bundesbank can participate in the ECB’s bond-purchase program, she told lawmakers in the lower house of parliament in Berlin on Wednesday. Merkel said she will respond to the court’s ruling.
“I have an interest that options are used to defuse the conflict,” Merkel said, adding that the European Commission was justified in questioning the German court’s jurisdiction.
Germany’s top court ruled May 5 that the ECB is violating EU law by failing to properly justify the bond-purchase program, known as quantitative easing, or QE. The judges said that the Bundesbank can no longer participate in the program unless the ECB explains its policies within three months.
The 7-to-1 decision, which goes against a 2018 ruling by the EU Court of Justice that upheld QE, opened a rift between the regional and national courts, and marked a blow to the bloc’s unity as the fallout form the coronavirus strains relations.
Speaking later in the day to the European Parliament, Charles Michel, who leads meetings of EU leaders, defended the authority of the ECJ.
“European law has primacy,” Michel told lawmakers. “The role of the European Court of Justice is essential to ensure uniform interpretation of European law.”
Peter Huber, a member of the German tribunal, said Tuesday in a newspaper interview that the ruling asks the ECB to publicly take responsibility for QE and to explain it to those negatively affected by it.
The central bank must show that it hasn’t overstepped its powers, as it doesn’t have the right to act just because Europe is in a crisis, he told the Sueddeutsche Zeitung.
Asked about the court ruling, ECB chief economist Philip Lane said that the EU’s top court has already assessed the bond-buying program and “has judged it to be within our mandate.”
“Independent central banks need to be able to explain and be accountable for what they’re doing,” and the ECB is doing that “through the European Parliament and the ECJ,” he said in an online discussion on Wednesday.
His Governing Council colleague Olli Rehn said in a separate forum that he sees no immediate impact on the central bank’s monetary policy from the ruling.
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