7 - Selective Government Bond Purchases

Summary

The ECB’s selective bond purchases raised constitutional controversies from the start. The SMP was criticised for overstepping the lines of EU monetary policy and basically financing Member States. The OMT was an effective lender of last resort for governments, although never operationalised. The purchases also gave rise to the first substantive CJEU judgment on monetary policy. The chapter combines economic and legal research to get to the heart of the problems. Specific questions relate to the role of government bonds in the transmission of monetary policy, and to the risks of contagion and currency redenomination as justifiable reasons to selective bond purchases. The broader constitutional assessment of the ECB selective purchases finds many critical areas for the EMU constitutional architecture. Some solutions such as the CJEU's excessive reliance on the objectives of measures for defining them as common monetary policy or Member States economic policy left room for criticism. The chapter argues that the principle of conferral risks becoming void if the independent ECB can effectively dictate its own mandate, calling for a more economic definition of monetary policy. In addition, the circumstances around the programmes raised questions concerning the independence of the ECB.