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’.