https://econoblog101.wordpress.com/2020 ... ommentary/
The German constitutional court’s judgment on the ECB’s bond purchase – a brief commentary
In today’s ruling, the Federal Constitutional Court upheld several constitutional complaints against the Public Sector Purchase Programme (PSPP), stating that the ECB’s decisions on the Public Sector Purchase Programme were incompetent, as the proportionality had not been assessed:
A public sector purchase programme such as the PSPP, which has significant economic policy implications, requires in particular that the monetary policy objective and the economic policy implications are identified, weighted and balanced against each other. Therefore, the unconditional pursuit of the monetary policy objective of the PSPP to achieve an inflation rate below but close to 2 %, while ignoring the economic policy implications of the programme, appears to disregard the principle of proportionality.
The necessary balancing of the monetary policy objective with the economic policy implications of the means used does not follow from the decisions which are the subject of this procedure. They therefore infringe the second sentence of Article 5 (1) and (4) TEU and are not covered by the ECB’s competence in the field of monetary policy.
In my opinion, this assessment is adventurous. A central bank has a big hammer – interest rates – and almost as big – the rules on what collateral is accepted for central bank loans. To be able to influence interest rates in the long term, a central bank buys and sells government bonds. In the euro area, this is done through resale transactions (so-called repos = repurchase agreements). This is fundamental – without trading in government bonds, the central bank cannot influence interest rates and yields. (Technically, it would be possible to set interest rates in such a way that the interbank market rate is set without the central bank buying and selling government bonds, but this requires that, in case of doubt, government bonds can be bought in large quantities by the central bank. This is not permanently fulfilled in the euro zone).
The German constitutional court’s judgment on the ECB’s bond purchase – a brief commentary
In today’s ruling, the Federal Constitutional Court upheld several constitutional complaints against the Public Sector Purchase Programme (PSPP), stating that the ECB’s decisions on the Public Sector Purchase Programme were incompetent, as the proportionality had not been assessed:
A public sector purchase programme such as the PSPP, which has significant economic policy implications, requires in particular that the monetary policy objective and the economic policy implications are identified, weighted and balanced against each other. Therefore, the unconditional pursuit of the monetary policy objective of the PSPP to achieve an inflation rate below but close to 2 %, while ignoring the economic policy implications of the programme, appears to disregard the principle of proportionality.
The necessary balancing of the monetary policy objective with the economic policy implications of the means used does not follow from the decisions which are the subject of this procedure. They therefore infringe the second sentence of Article 5 (1) and (4) TEU and are not covered by the ECB’s competence in the field of monetary policy.
In my opinion, this assessment is adventurous. A central bank has a big hammer – interest rates – and almost as big – the rules on what collateral is accepted for central bank loans. To be able to influence interest rates in the long term, a central bank buys and sells government bonds. In the euro area, this is done through resale transactions (so-called repos = repurchase agreements). This is fundamental – without trading in government bonds, the central bank cannot influence interest rates and yields. (Technically, it would be possible to set interest rates in such a way that the interbank market rate is set without the central bank buying and selling government bonds, but this requires that, in case of doubt, government bonds can be bought in large quantities by the central bank. This is not permanently fulfilled in the euro zone).
- bereits über ihre hohen Steuern via EU subventionieren - und damit leider eher die Agrarindustrien denn den kleinen Nebenerwerbsbauern 
).
