German Top Court Expected to Extend ‘Yes, But’ Doctrine

Germany's Federal Constitutional Court is reviewing European Central Bank programs to buy bonds from countries in crisis.

Germany’s top court probably won’t block the European Central Bank’s (ECB's) plan to buy bonds of crisis-torn countries, in line with previous cases involving European Union integration. The ECB’s Outright Monetary Transactions program and the European Stability Mechanism will be reviewed by the Federal Constitutional Court in Karlsruhe at hearings this week. While the judges may voice serious doubts about the central bank’s plans and attach some conditions, the court won’t stop it, said Christoph Ohler, a law professor at Jena University.

“It’s tough to say exactly how the court will handle this, but we can expect something close to the ’yes, but’ approach the judges have used before in European integration and euro-rescue operation cases,” said Ohler. “The court has never blocked anything on the European level, but in the ’strings-attached’ part, unusual and surprising details can always pop up.”

Monetary Policies

Two members of the ECB Governing Council and German Finance Minister Wolfgang Schaeuble will all address the court during the hearings. Joerg Asmussen, an ECB executive board member, will represent the central bank, while Weidmann, who is also an ECB council member, will represent the Bundesbank at the court hearing. Schaeuble will defend the government’s policies.

Strings Attached

From a legal perspective, both stances about the ECB’s action are viable, Ohler said.

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