An adviser to Europe’s top court on Wednesday said the European Central Bank can legally buy large quantities of eurozone government debt to stabilize the currency area’s economy, delivering a key endorsement for the bank as it prepares another round of stimulus measures.
The opinion from the European Court of Justice’s advocate general, Pedro Cruz Villalon, comes in response to a lawsuit brought by German opponents of loose monetary policy claiming that the ECB’s Outright Monetary Transactions program, announced in August 2012 and widely credited with saving the euro, violates the European Union treaty. While the opinion isn’t binding on the court, the judges usually follow the advocate general’s reasoning. A ruling is expected in four to six months.
A negative opinion could have thrown the ECB’s next stimulus efforts into turmoil. ECB President Mario Draghi and other officials have been drawing up “quantitative easing” plans, in which the bank would buy large amounts of eurozone government debt, to boost the economy of the 19-nation currency area and prevent an extended period of deflation, a broad-based decline in prices that can have disastrous economic consequences.
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(WSJ) ECJ Adviser Says ECB Can Legally Buy Eurozone Government Debt
An adviser to Europe’s top court on Wednesday said the European Central Bank can legally buy large quantities of eurozone government debt to stabilize the currency area’s economy, delivering a key endorsement for the bank as it prepares another round of stimulus measures.
The opinion from the European Court of Justice’s advocate general, Pedro Cruz Villalon, comes in response to a lawsuit brought by German opponents of loose monetary policy claiming that the ECB’s Outright Monetary Transactions program, announced in August 2012 and widely credited with saving the euro, violates the European Union treaty. While the opinion isn’t binding on the court, the judges usually follow the advocate general’s reasoning. A ruling is expected in four to six months.
A negative opinion could have thrown the ECB’s next stimulus efforts into turmoil. ECB President Mario Draghi and other officials have been drawing up “quantitative easing” plans, in which the bank would buy large amounts of eurozone government debt, to boost the economy of the 19-nation currency area and prevent an extended period of deflation, a broad-based decline in prices that can have disastrous economic consequences.
Read it all.