This case was referred to the European Court of Justice by the German constitutional court to challenge a bond buying programme unveiled in 2012 by Mario Draghi at the height of the Eurozone crisis. The German court sought a ruling on whether the programme was an economic policy outside the ECB's mandate.
The ruling on 14th January 2015 found the programme to be compatible in principle with EU treaties and monetary policy under certain strict conditions which would preclude direct involvement in any financial assistance programme involving individual states. The advocate general found that the ECB is entitled to buy bonds on the secondary market, for example from pension funds and other investment organisations but without any direct financing of Eurozone states and an obligation to justify any extraordinary measures. He declined to set a ceiling on such purchases on the basis that this would trigger speculation. The proposal suggests that a market price would form for government bonds on the primary market with a separate price for the purchase of such bonds on the secondary market.
The legal advice was provided by Pedro Cruz Villalon, an advocate general at the European Court of Justice, ahead of a full ruling by judges in the summer. Statistically, judges agree with advocate-general assessments in roughly 70% of cases.
A massive programme of bond-buying by the European Central Bank was given the green light this morning, paving the way for it to spend hundreds of billions of euros to fight deflation. Government bond purchases were “compatible in principle” with EU treaties under certain strict conditions, an adviser to the European Court of Justice said.