The European Central Bank (ECB) has bought €80 billion worth of public and private debt since March 2015 in order to boost growth and push interest rates down. The bond buying programme has led to the bank being criticised for overstepping its mandate, but today the German constitutional court ruled that it wasn’t. ECB President Mario Draghi is expected to discuss the strategy known as quantative easing during his meeting with Parliament’s economic committee today from 15.00 CET.
The ECB plans to continue purchases of public and private debt until at least March 2017. However, some have argued that by buying government bonds, the ECB is making it easier for countries to borrow money at a time when they should be implementing austerity measures. They also consider that by demanding economic reforms in return for debt purchases from eurozone countries that have run into in trouble, the ECB is overstepping its mandate, which is maintaining price stability and not running economic policy.
With eurozone inflation hovering around zero – well below the ECB’s target of two per cent – the bank says this is exactly what it tries to do by buying public and private sector debt: lowering long-term interest rates, kick-starting investment and boosting growth, which will result in higher inflation.
The European Court of Justice already sided with the ECB, saying that the bond buying programme is in line with EU treaties. Today the German constitutional court, which originally referred the question of legality of bond purchases to the European Court of Justice, also green-lighted the programme.
Compliments of the European Parliament