8 - The ECB’s Quantitative Easing

Summary

The ECB started its QE called the PSPP in 2015 as a new monetary policy measure. By purchasing vast monthly amounts of main Member State government bonds, the ECB aimed to force investors towards riskier assets, which in turn, was to increase asset prices and support bank lending, and ultimately lead to growth and inflation. Constitutionally, QE was a new type of complication for the European Macroeconomic Constitution. The ECB became the largest creditor of Member States it was prohibited to finance. The constitutional assessment of the PSPP combines the analysis of the CJEU’s Weiss case that contains very limited constraints for the ECB, and more economic-constitutional and thus substantive analysis. One key question is whether the PSPP is monetary policy, which can be analysed through its objectives, its economic content and examples of other central banks that mostly support an affirmative conclusion. The euro area constitutional structure adds further complications that were also raised in the FCC’s Weiss judgment. The PSPP has arguably broader implications for other areas of economic policy, as it facilitates Member States public finances and increases wealth differences by increasing asset prices, as well as making the ECB deeply dependent on Member States public finances.