“Carte blanche ‘for ECB buyback operations – Financieele Dagblad (Registration)

"Carte blanche 'for ECB buyback operations – Financieele Dagblad (Registration)

The way is open for the European Central Bank next week to announce a large-scale purchase program of government bonds. A major hurdle is taken now the Advocate General concluded by the European Court of Justice that it never used buyback program OMT has not breached the European Convention.

The Advocate General of the European Court of Justice, the ECB Wednesday virtually given a carte blanche for the OMT-purchasing program,” writes economist Michael Schubert of Commerzbank in a comment. The opinion of the Advocate General is important for the Court. In most cases, the Court has concluded that now comes at an important moment: just before the ECB next week may decide for a new step. Possibly a buyback program of hundreds of billions launched in an attempt to avert structural deflation.

Objections

The conclusion of Luxembourg is purely about the OMT, but come into play no objections raised affecting any decision to buy government bonds on a large scale (QE) in a new buyout program. On the contrary, according to the conclusion the ECB should in general at the monetary policy of a “broad discretion” to have, and courts in their supervision a considerable restraint because they lack the expertise and experience that in this area the ECB ‘ .

Commercial Bank Nomura ruling also mentions positive for the ECB in the design and implementation of new policy instruments. “The European Court also does not refer to a ceiling on possible purchase volumes or to equal treatment with other investors in government bonds. That’s good news from the perspective of QE. “There are no restrictions imposed in that respect and that makes it better according to Nomura possible to reach a compromise between supporters and opponents of the ECB.

ECB-directielid Yves Mersch responded anyway elated at the news. He pointed out that Frankfurt a “substantial discretion” is assigned to monetary policy, reports Reuters. “The opinion notes first very clear that the ECB is solely responsible for the definition and implementation of monetary policy,” Mersch said. ECB President Mario Draghi hinted there Wednesday in an interview that the central bank is ready to intervene if necessary in the government bond market.