An adviser to Europe\u2019s top court on Wednesday said the European Central Bank can legally buy large quantities of eurozone government debt to stabilize the currency area\u2019s economy, delivering a key endorsement for the bank as it prepares another round of stimulus measures.<\/p>\n
The opinion from the European Court of Justice\u2019s advocate general, Pedro Cruz Villalon, comes in response to a lawsuit brought by German opponents of loose monetary policy claiming that the ECB\u2019s Outright Monetary Transactions program, announced in August 2012 and widely credited with saving the euro, violates the European Union treaty. While the opinion isn\u2019t binding on the court, the judges usually follow the advocate general\u2019s reasoning. A ruling is expected in four to six months.<\/p>\n
A negative opinion could have thrown the ECB\u2019s next stimulus efforts into turmoil. ECB President Mario Draghi and other officials have been drawing up \u201cquantitative easing\u201d\u009d 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.<\/p>\n