German top court criticises European Central Bank crisis bond-buying

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AFP

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The decision does not directly affect the current European Central Bank coronavirus aid

Germany's higher court ruled that the massive purchase of European Central Bank bonds to stabilize the eurozone partially violates the German constitution.

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The decision relates to the government's debt worth trillions of euros purchased by the ECB since 2015, but not to purchases in the current coronavirus crisis.

The Karlsruhe Constitutional Court says there is not enough German political oversight over purchases.

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The Bundesbank of Germany has the greatest weight in the decisions of the ECB.

Italy is among the countries most dependent on ECB bond purchases today, due to the severe economic impact of the coronavirus pandemic.

Mass bond buying was launched after the eurozone crisis in 2010 to support the euro, in addition to EU national bailouts for Greece and some other countries.

The authors, including a far-right politician from the Alternative to Germany (AfD), argue that the purchases violate the EU ban on one eurozone member to subsidize another's debts.

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The court ruled that the German government and parliament were unable to guarantee that the ECB's purchases were "proportionate".

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But the court did not conclude that the ECB's actions violated the EU's ban on direct budget support.

The court also stated that "this decision does not concern the current financial aid from the EU or the ECB provided in the coronavirus crisis".

It is now up to the ECB to explain how its mass bond buying program is "proportional". The Bundesbank could give up if it is not satisfied with the ECB's explanation, which would be a major blow to the eurozone.

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