Will Germany be subject to infringement proceedings arising from the ECB bond purchase programme?

Dr. S-W; UM – 05/2020

The Public Sector Purchase Programme (PSPP) of the European Central Bank (ECB) primarily deals with the purchase of government bonds in the Member States. The resulting increase in the money supply is intended to promote consumer spending and investment and avert the risk of deflation. Debt securities with a value of more than €2 trillion had been acquired up until November 2019.

Federal Constitutional Court: ECB and CJEU acted ultra vires

On 5 May, the German Federal Constitutional Court (BVerfG) upheld a series of constitutional complaints concerning the programme and the ECB’s actions. In the resulting judgements, it was stated that the ECB had overstretched its mandate and had failed to explain or examine the proportionality of the measures. The complete exclusion of the effects of the programme on economic policy was also methodologically untenable. This is the first time that the Federal Constitutional Court has classified the actions of an EU body as exceeding its competences (‘ultra vires’). The opposing view of the European Court of Justice (ECJ) set out in its ruling of 11 December 2018 (Case C-493/17) does not merit a different conclusion. This ruling, with its conclusion of the ECB decisions fulfilling the principle of proportionality, was simply not comprehensible so that, to this extent, the judgment was rendered ultra vires’, the BVerfG judges stated in their own ruling (2 BvR 859/15).   

European integration is a sensitive area

Issues related to the legal consequences of ultra vires acts are one of the key concerns of European integration. If, on the one hand, national courts decide on the validity of Union legal acts, the primacy of European law is in danger of being rendered meaningless. If, on the other hand, the Member States were to completely abandon ultra vires monitoring of the actions of the European institutions and bodies, this could result in arbitrary Treaty amendments or an extension of the Union’s competences. Finally, the principle of conferral means that the European institutions may only act within the scope of the powers conferred on them by the Member States.

In this case, the BVerfG judges were of the opinion that the ECB was negligent. This can be rectified quite simply by the ECB performing a review of proportionality. However, until this is done the Bundesbank is prohibited from implementing PSPP decisions. Furthermore, the ECJ should have been more diligent in its scrutinising.

The ruling by Germany’s highest court is a political issue because it concerns the Union’s very identity and the delicate balance between the sovereignty of the Member States and the Union, between a ‘confederation of governments and a ‘federal government’. The reaction from Brussels has been accordingly hard-hitting. The Commission is currently looking at initiating infringement proceedings against Germany.

In the middle of the corona crisis …

The timing of the judgment also seems unfavourable at first glance. Some people believe that the BVerfG should have intervened sooner, even as early as the financial crisis. On the other hand, it did not come as a complete surprise. In the ‘Solange’ rulings of 1974 and 1986, the German court ruled that is has final say over conflicts between EU law and the fundamental rights guaranteed in Germany’s Basic Law. This was confirmed by the 1993 Maastricht ruling, which the current ruling was ultimately based on. At this point, the European institutions could have started to act as they perhaps do today. However, in those days there was one crucial difference from now – the Monetary Union and the euro were not yet ‘cut and dried’.