Gauweiler and Others v Deutscher Bundestag

On January 14 2014, the German Federal Constitutional Court (German: Bundesverfassungsgericht; GFCC) made its first preliminary reference to the European Court of Justice. The reference pointedly challenged the Outright Monetary Transactions (OMT) program, an initiative by the European Central Bank (ECB) to bolster economic stability by purchasing Eurozone government bonds on secondary markets. Although the OMT had not been implemented to date, its technical features were announced via press release on September 6 2012. The ECB said it would buy bonds on the secondary markets issued by states if (1) the state became subject to the European Financial Stability Facility assistance programme and the European Stability Mechanism (2) transactions focused on the shorter part of the yield curve (3) no quantitative limits were set in advance (4) the ECB got the same treatment as private creditors (5) the ECB undertook that liquidity created would be fully sterilised. Following a challenge raised by conservative German politician Peter Gauweiler, the GFCC objected to the OMT on two grounds. ==Judgment==

The Grand Chamber of the CJEU held that the European Central Bank could adopt a programme to buy government bonds on the secondary markets under TFEU articles 119, 123, 127 and articles 17 to 24 of Protocol (No 4) on the Statute of the European System of Central Banks and of the European Central Bank. The outright monetary transaction programme was monetary policy, and measures taken were proportionate to the objectives without contravening TFEU art 123. == Aftermath ==

Following the ECJ’s opinion, contemporary commentators worried that the German Constitutional Court would challenge its primacy. Although the ECJ had not explicitly specified any legally binding limiting conditions, the GFCC extrapolated several criteria that the OMT would be required to observe in order to retain legitimacy: • The volume of the purchases must be limited from the outset • There must be a minimum, predetermined period between the issuance of the government bonds and their purchase by the ESCB • The ESCB must only purchase government bonds of Member States that have bond market access enabling the funding of such bonds • Purchased bonds must only be held until maturity in exceptional cases • Purchases must be restricted or ceased and purchased bonds remarketed once continued intervention becomes unnecessary The GFCC’s deference ceased in 2020 however with the Weiss and others case. This case saw a similar Basic Law challenge mounted against the ECB’s Public Sector Asset Purchase Program, which coordinated purchases of member states’ debt securities on secondary markets. The GFCC found the ECJ’s response to its preliminary reference inadequate, arguing that it failed to consider “the importance and scope of the principle of proportionality,” which had justified restraint in Gauweiler. The GFCC further asserted that the ECJ did not consider the “actual effects” of the PSPP on economic policy, nor did it adequately enforce the aforementioned standards. ==See also==