diritto dell'Unione europea

Friend or Foe? The German Federal Constitutional Court’s Request for a Preliminary Ruling on the ECB’s OMT Program

I fully share the views expressed by my esteemed colleague and friend Anna Viterbo posted on this blog. In this post, I would like to add three further points. They concern the relationship between the German Federal Constitutional Court (GFCC) and the Court of Justice of the European Union (CJEU) as well as the European Central Bank (ECB). In my view, those three points raise doubts as to whether and how the GFCC’s request might advance the cooperative relationship between the institutions involved. 

1. Admissibility: The GFCC invents a popular action

The admissibility of this case under German law raises two questions. First the case is directed against the failure of the German federal government, of the federal diet (Bundestag) and of Bundesbank to take steps to prevent or repeal the OMT program. As Judge Lübbe-Wolff stresses in her dissenting opinion, it is not entirely clear what kind of obligation would ensue from this case for the federal institutions should they succumb. The Bundesbank might have to try to stop the OMT program. But what if this proves to be unsuccessful? Would Germany have to leave the eurozone? Since the European treaties do not provide for an exit option from the monetary union, a treaty would have to be negotiated and ratified by the diet. Since one cannot request the diet to adopt a certain view, all that one might request is the initiation of efforts to this effect, such as a debate in the federal diet. But, as Judge Lübbe-Wolff observes, a judgment which obliges the federal diet to hold a debate would be much ado about nothing.

Admitting this case has a second implication. The case is based on the claim that the OMT program violates the right to a vote under Art. 38 of the Basic Law because the ECB acted ultra vires. Plaintiffs do not invoke their right to property as in previous unsuccessful litigation against the introduction of the euro. Neither do they base their claim on any other alleged violation of fundamental rights. Consequently, the GFCC implicitly accepts popular actions directed against alleged violations of the European treaties by EU institutions. Previous cases raising the question whether the EU acted ultra vires like “Honeywell” were based on alleged violations of fundamental rights like the right to conclude contracts included in Art. 12 of the Basic Law. Although previous case law contains several obiter dicta where the GFCC recognized the possibility of basing complaints against ultra vires acts on Art. 38 of the Basic Law, this de-facto extension of the individual complaints procedure to a popular action receives no particular attention in the majority opinion.  The majority tries to curb the impact of popular action by the requirement that ultra vires acts need to be “sufficiently qualified”. However, this is not a question of admissibility.

2. Cooperative Relationship between GFCC and CJEU

Being the first request for a preliminary ruling, the case certainly should be seen as a landmark in the “cooperative relationship” which the GFCC maintains with the CJEU and as an expression of its pro-integration policy. However, the GFCC provides a concise interpretation of the TFEU, according to which the OMT program is in violation of Arts. 119, 127 TFEU (obliging the ECB to pursue price stability) and Art. 123 TFEU (prohibiting the purchase of government debt by the ECB). The only alternative which the judges devise is a re-interpretation of the OMT program in conformity with the treaties. That would require ensuring that ECB purchases do not jeopardize conditionality under ESM programmes, that the effects of the OMT program for economic policy remain marginal, that the bonds purchased by the ECB purchases are excluded from a sovereign default, and that the effects of OMT for market prices remain marginal.

Whether the assumption of the court that these requirements would not defeat the purpose of the OMT program is correct, is a different question. The GFCC’s strategy shows that it understands the cooperative relationship as a one-way street, or at least as an asymmetrical relationship. Should the CJEU not follow the interpretation given to the treaties by the GFCC and curb the effects of the OMT program in the way devised by the GFCC, the GFCC might come to the conclusion that the OMT program, as ratified by the CJEU, oversteps the ECB’s treaty powers in a way that violates Germany’s constitutional identity because it bereaves the federal diet of its budgetary autonomy. The GFCC makes it abundantly clear that it thinks that all requirements for such a conclusion are met.

If push comes to shove, it is of course hard to predict whether the GFCC would actually go that step and assume responsibility for a new flare of the crisis. Also, as has been said above, the legal consequences of such a decision would be unclear. Instead of an exit from the eurozone, the German government might suggest adopting a new, more integration-friendly constitution on the basis of Art. 146 of the Basic Law. That would set an end to Karlsruhe’s control. On the other hand, one might also doubt whether the CJEU would be willing to incur the risks involved in any form of non-compliance by Germany. Should the CJEU by and large follow the GFCC, the GFCC might have obtained the “ultimate say” in this cooperative relationship – by way of a request for a preliminary ruling!


3. What Standard of Review for ECB Decisions?

The GFCC rightly points out that the ECB’s independence does not immunize it against any form of judicial review. However, it then applies a full review of the OMT program without giving further consideration to the appropriate standard of review. In my view, the GFCC should have granted the ECB a considerable margin of appreciation. Certainly, the ECB does not possess democratic legitimacy like a Parliament. But it draws its legitimacy from its expertise, and of course from its mandate. As Judge Gerhard emphasizes in his dissent, “price stability” is only an objective, not an exact rule requiring or prohibiting a specific action in a specified situation. And indeed, the distinction between legitimate monetary politics and illegitimate fiscal politics is contested. While the GFCC assumes the position that both can be neatly separated, Anna Maria Viterbo explains in her post that monetary politics and fiscal policy might be blurred as a consequence of the crisis – a widely shared view ignored by the GFCC. Similar considerations apply to the GFCC’s interpretation of Art. 123 TFEU. Here, the GFCC casts the fact to the wind that the mentioned provision explicitly prohibits only primary market purchases. The reason for this lies in the fact that it is so difficult to tell legitimate from illegitimate secondary market purchases. However one draws the line between monetary and fiscal policy, the fact that this line is disputed among economists should have been reason enough for the GFCC to exercise its review with some restraint. For example, it could have exercised some sort of rationality check.

Instead, the GFCC corroborated its view with the argument that the ECB should not gear its monetary policy towards maintaining  the integrity of the monetary union and its membership because Art. 140 TFEU left that question to political decision-makers. This view certainly does not hold because Art. 140 TFEU only addresses accession to the monetary union. The treaties do not provide for any exit procedure or for its dissolution. At least this issue might give the CJEU the opportunity to liberate itself from the firm grip of Karlsruhe’s friendly handshake.

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Matthias Goldmann

Matthias Goldmann

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