Gauweiler and Others v Deutscher Bundestag

The German Constitutional Court asked the CJEU whether the European Central Bank buying govt bonds issued by euro states (the ‘Outright Monetary Transactions’ programme), in a 6 September 2012 press release, was unlawful, either because it was economic policy, not monetary policy, or because it violated TFEU art 123(1) which prohibited monetary financing for member states.[1] This followed a conservative German politician named Peter Gauweiler challenging the ability of the Eurozone to assist non-German member states that were in financial difficulty. The ECB said it would buy bonds on the secondary markets issued by states if (1) the state became subject to the European Financial Stability Facility assistance programme and the European Stability Mechanism (2) transactions focused on the shorter part of the yield curve (3) no quantitative limits were set in advance (4) the ECB got the same treatment as private creditors (5) the ECB undertook that liquidity created would be fully sterilised.

AG Cruz Villalon gave an opinion in favour of the EU policy.[2]

The Grand Chamber of the CJEU held that the European Central Bank could adopt a programme to buy government bonds on the secondary markets under TFEU articles 119, 123, 127 and articles 17 to 24 of Protocol (No 4) on the Statute of the European System of Central Banks and of the European Central Bank. The outright monetary transaction programme was monetary policy, and measures taken were proportionate to the objectives without contravening TFEU art 123.

102 It follows that, as the Advocate General has observed in point 227 of his Opinion, when the ECB purchases government bonds on secondary markets, sufficient safeguards must be built into its intervention to ensure that the latter does not fall foul of the prohibition of monetary financing in Article 123(1) TFEU.

103 As regards a programme such as that announced in the press release, it must in the first place be stated that, in the framework of such a programme, the ESCB is entitled to purchase government bonds — not directly, from public authorities or bodies of the Member States — but only indirectly, on secondary markets. Intervention by the ESCB of the kind provided for by a programme such as that at issue in the main proceedings thus cannot be treated as equivalent to a measure granting financial assistance to a Member State.

104 That said, the point should be made, in the second place, that the ESCB’s intervention could, in practice, have an effect equivalent to that of a direct purchase of government bonds from public authorities and bodies of the Member States if the potential purchasers of government bonds on the primary market knew for certain that the ESCB was going to purchase those bonds within a certain period and under conditions allowing those market operators to act, de facto, as intermediaries for the ESCB for the direct purchase of those bonds from the public authorities and bodies of the Member State concerned.

105 However, the explanations provided by the ECB in these proceedings have made clear that the implementation of a programme such as that announced in the press release must be subject to conditions intended to ensure that the ESCB’s intervention on secondary markets does not have an effect equivalent to that of a direct purchase of government bonds on the primary market.

• United Kingdom enterprise law