EU supports the purchase of assets of the ECB – The Economist

EU supports the purchase of assets of the ECB – The Economist

The European Court expressed its full support to support the euro, after he was removed an obstacle to plans to buy government bonds.

The European Central Bank achieved a crucial support for their commitment to do whatever is necessary to support the euro, after a major legal advisor to the highest court in the European Union withdrew an obstacle to plans to buy government bonds boost the economy of the euro zone.

Pedro Cruz Villalon, Advocate General of the European Court of Justice, said the bond purchase plan prepared by the ECB in 2012, at the height of the crisis Eurozone, to prevent rupture of the single currency and has not been used so far, is not contrary to European law.

This review represented a clear setback for critics Germans of the bond purchases, and who argue that the ECB would reward countries with cheap credit wasteful printing more money and avoiding painful reforms.

“The OMT (Direct Monetary Operations, for its acronym in English) (program. ..) falls within the monetary policy of the Treaty (EU) responsible to the ECB, “said Cruz Villalon, in an opinion which was enthusiastically welcomed by financial markets.

The euro moved through below its launch for the first time in a decade after the publication of the review, understood by investors as a green light to the ECB to continue with their plans.

The opinion of advisor, usually followed by the judges of the court, was a milestone in a long dispute about printing money and the limits of the powers of the central bank between the ECB and Germany, the largest member of the bloc of 19 countries.

The German Finance Ministry welcomed the review, ensuring that brings clarity and supports the backing of Berlin to the program.

But other critics were surprised by the freedom of action offered Review the ECB.

“The ECB would become a bad bank,” he said Hans Michelbach, a member of the allied party of Chancellor Angela Merkel in Bavaria.

“It the beginning of a transfer union through the back door, “he said, reflecting an ancient fear that Germany is forced to subsidize poorer states such as Greece and Portugal.

The influential German Bundesbank, which I testified against OMT program in the German constitutional court and is also contrary to more money printing by the ECB, remained silent.

In the ECB headquarters in Frankfurt there was a sense of vindication. The Executive Committee member Yves Mersch said the review shows that the entity has a “considerable discretion” over politics.

Marcel Fratzscher, president of the German Institute for Economic Research, based in Berlin, noted that opinion is a victory for the ECB.

“A so strong and overwhelming support for the ECB is surprising and could not be expected,” he said. “I think that this recommendation will strengthen the position of the ECB and make it more likely a new program to buy government debt.”

The company could announce next week a new plan to purchase government bonds in the euro area known as quantitative easing, to fight deflation and return to a more stable pace depressed economy.

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