Court to decide on legality of Draghi’s bond buying

The European Court of Justice is expected to report next year

Economics editor

The legality of Mario Draghi’s emergency bond buying programme, which saved the single currency from collapse in 2012, will be reviewed by the Continent’s highest legal authority.

Germany’s constitutional court, which had been asked to examine the issue, said on Friday there were grounds for believing the European Central Bank’s so-called Open Market Transactions scheme constitutes a breach of its mandate under European law.

But the court conceded there was also a chance the OMT could be legal if sufficiently circumscribed, and it will therefore refer the decision to the European Court of Justice (ECJ) in Luxembourg for a final verdict. The ECJ is expected to report next year.

The announcement was interpreted as a sign that the OMT, which has underpinned confidence in European bonds markets since the summer of 2012, will not be dismantled.

“It is widely accepted that the ECJ would look more favourably on the case,” said Peter Schaffrick of RBC Capital Markets. “It might well lead to a somewhat downsized OMT framework, but we consider it unlikely that it will fall entirely.”

“We think that this is very good news and expect that the OMT remains fully in place,” concurred Andreas Rees of UniCredit MIB in Munich.

However, Carsten Brzeski of ING Group warned it was “not a given” the European Court of Justice will rubber-stamp the OMT.

The euro initially fell against the dollar yesterday, but then rose strongly, ending up 0.2 per cent at $1.361.

In the summer of 2012 Mr Draghi pledged to do “whatever it takes” to prevent the break-up of the eurozone. Shortly after, the central bank unveiled the OMT, which outlined how it would buy up the bonds of distressed nations that came under sustained attack. Mr Draghi was credited with saving the single currency from implosion.

Italian and Spanish bond yields remained under control yesterday, declining to 3.7 per cent and 3.6 per cent.

Critics say the OMT contravenes the European treaties that limit the ECB to monetary policy and proscribe the financing of the deficits of member states.

Start your day with The Independent, sign up for daily news emails
News
Howard Marks who has been diagnosed with inoperable cancer aged 69
people
Arts and Entertainment
Benedict Cumberbatch has spoken about the lack of opportunities for black British actors in the UK
film
Voices
Winston Churchill, then prime minister, outside No 10 in June 1943
voicesA C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
News
Rowan Atkinson at the wheel of his McLaren F1 GTR sports car
people
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Recruitment Genius: Outbound Sales Executive - OTE £25,000

£16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Java Developer / J2EE Developer - Watford - £45,000 - £47,000

£45000 - £47000 per annum + bonus + benefits: Ashdown Group: Java Developer / ...

Ashdown Group: Marketing Product Manager - (Financial Services) - SW London

£35000 - £38000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Day In a Page

Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
America: Land of the free, home of the political dynasty

America: Land of the free, home of the political dynasty

These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
A graphic history of US civil rights – in comic book form

A graphic history of US civil rights – in comic book form

A veteran of the Fifties campaigns is inspiring a new generation of activists
Winston Churchill: the enigma of a British hero

Winston Churchill: the enigma of a British hero

A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
Growing mussels: Precious freshwater shellfish are thriving in a unique green project

Growing mussels

Precious freshwater shellfish are thriving in a unique green project
Diana Krall: The jazz singer on being friends with Elton John, outer space and skiing in Dubai

Diana Krall interview

The jazz singer on being friends with Elton John, outer space and skiing in Dubai
Pinstriped for action: A glimpse of what the very rich man will be wearing this winter

Pinstriped for action

A glimpse of what the very rich man will be wearing this winter
Russell T Davies & Ben Cook: 'Our friendship flourished online. You can share some very revelatory moments at four in the morning…'

Russell T Davies & Ben Cook: How we met

'Our friendship flourished online. You can share some very revelatory moments at four in the morning…'
Bill Granger recipes: Our chef serves up his favourite Japanese dishes

Bill Granger's Japanese recipes

Stock up on mirin, soy and miso and you have the makings of everyday Japanese cuisine
Michael Calvin: How we need more Eric Cantonas to knock some sense into us

Michael Calvin's Last Word

How we need more Eric Cantonas to knock some sense into us