Abstract
This article studies the hidden blemishes of two benchmark rulings of the European Court of Justice (ECJ). In 2015 and 2018, the ECJ approved two unconventional monetary instruments, among others ‘Outright Monetary Transactions’ and the ‘Public Sector Purchase Program’. Yet, there is a vigorous debate about both monetary operations in law and economics. In this interdisciplinary article, we address law and economic arguments in order to elucidate insights to the legal community. In particular, we elaborate on the legal implications of a variety of concerning issues such as public policy interference, effect on wealth redistribution, erosion of democratic legitimacy and lack of effectiveness of monetary policy. These topics remain disregarded in the ECJ rulings. Consequently, the verdicts do not identify the economic boundaries of the European Central Bank’s mandate appropriately.
Highlights
On 16 June 2015, the European Court of Justice (ECJ) concluded that ‘Outright Monetary Transactions’ (OMTs) of the European Central Bank (ECB) are consistent with European law
Article 18.1 of the ECB Statute does not preclude the possibility of Emergency Lending Assistance (ELA) or bond purchasing programmes as long as the programme supports the general economy, as laid down in Article 3 TEU and as long as it is contingent under Article 127(1) and Article 282(2) TFEU (ECJ 2018)
Thereafter, Emergency Lending Assistance (ELA) could only be considered if an EU/IMF program is in place that would ensure the solvency of the concerned banks (ECB 2013)
Summary
On 16 June 2015, the European Court of Justice (ECJ) concluded that ‘Outright Monetary Transactions’ (OMTs) of the European Central Bank (ECB) are consistent with European law. The ECJ states that as long as the unconventional instrument pursues the primary objective of maintaining price-stability in Article 127(1) TFEU, all programmes fall within the ambit of. The treaty explicitly prohibits monetary interference in fiscal and economic matters, according to Article 119(2) TFEU and Article 2 of the ECB Statute. The ECJ reduces those restrictions significantly by arguing that a monetary measure cannot be treated as equivalent to an economic instrument for the reason that it may have indirect effects on the real economy.. The ECJ reduces those restrictions significantly by arguing that a monetary measure cannot be treated as equivalent to an economic instrument for the reason that it may have indirect effects on the real economy.3 This legal interpretation casts doubt on the demarcation line between economic and monetary policy. This article discloses a unique understanding about the ECB and the respective ECJ rulings
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