October 20
2020
Dolores Utrilla
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5th August 2020
Banking & Finance Institutional law Justice & Litigation

Insight: “Three months after Weiss: Was nun?” by Dolores Utrilla

Three months ago, on 5 May 2020, the Second Senate of the German Federal Constitutional Court (Bundesverfassungsgericht, ‘BVerfG’) rendered its judgment in Weiss (2 BvR 859/15, available in English here), by which it declared ultra vires and not applicable in Germany both the judgment of the Court of Justice in Weiss and Others (C-493/17) and several Decisions of the European Central Bank (ECB) concerning the 2015 Public Sector Purchase Programme (PSPP). Selbstverständlich, the BVerfG’s ruling does not affect the validity of either the CJEU’s judgment or the ECB’s PSPP. It was formally addressed to the German Federal Government (Bundesregierung) and the German Parliament (Bundestag), as well as (indirectly) to the German Central Bank (Bundesbank). 

Deadlines matter. The BVerfG’s judgment ordered the Bundesbank, subject to a grace period of three months, not to participate any longer in purchases under the PSPP and to wind down all purchases made in the past in an orderly way, unless by that time ‘the ECB Governing Council adopts a new decision that demonstrates in a comprehensible and substantiated manner that the monetary policy objectives pursued by the PSPP are not disproportionate to the economic and fiscal policy effects resulting from the programme’. This in turn means that the ECB had a three-month period to provide a reinforced proportionality justification for the PSPP, and that within that deadline both the Bundesregierung and the Bundestag (the only formal addressees of the judgment) were required to conduct a new assessment on the programme and on whether the Bundesbank may keep on taking part on it.

Time has come now to assess whether the conditions imposed by the BVerfG’s ruling have been met and whether therefore the conflict has been softened – at least for the time being and as long as it concerns the participation of the Bundesbank in the PSPP. 

As of 5 May 2020, the course of action to be taken by the actors performing in this rare scenario was all but clear. This was particularly the case for the ECB. The ‘new decision’ demanded by the BVerfG lacks a clear legal basis under EU law (as explained here by Nathan de Arriba-Sellier), and any clear response by the ECB consisting of a provision of a reinforced proportionality justification would entail a tacit recognition of the BVerfG’s new role as ultimate guardian of EU law (as explained here by Daniel Sarmiento). At the same time, according to EU law national central banks (among which the Bundesbank) cannot receive instructions from Member States and are subject to the exclusive jurisdiction of the CJEU (Articles 130 and 271 TFEU). In turn, as national public powers, the Bundesregierung and the Bundestag are bound by the BVerfG decisions, but also by EU law and the principle of primacy.

On 5 May 2020, the ECB issued a brief press release stating that it would abide by the Court of Justice’s ruling in Weiss and Others, which confirmed that it acted within its price stability mandate when adopting and implementing the PSPP. In turn, Bundesbank President Jens Weidmann stated that ‘while respecting the independence of the ECB’s Governing Council’, he would ‘support efforts to meet the BVerfG’s requirement’. However, he somehow pointed to an intermediate route, suggesting that a new justification (and not necessarily a new decision) would suffice to meet the requirements of the Weiss ruling: ‘The Governing Council of the ECB now has a period of three months to present its deliberations regarding the proportionality of the programme’. At the beginning of July, Yves Mersch, Member of the ECB Executive Board, stated that the ECB ‘supports the Deutsche Bundesbank in its cooperation with the German Federal Government and the Bundestag’, whilst recalling that the ECB is accountable only to the European Parliament and subject to the jurisdiction only of the CJEU.

As of 5 August 2020, the only clear point is that the Governing Council of the ECB has not issued ‘a new decision that demonstrates in a comprehensible and substantiated manner that the monetary policy objectives pursued by the PSPP are not disproportionate’. However, it has undertaken several actions to communicate evidence that proves the proportionate character and effects of the PSPP. 

The ECB has indeed taken unusual steps to demonstrate the proportionality of the programme. In particular, it has released several meeting minutes that highlighted the debate amongst ECB members on the economic effects of the asset purchases. As explained here by Phedon Nicolaides, a comparison between these minutes and previous ones makes apparent that the ECB is now using a reinforced proportionality-based reasoning in its debates. Moreover, at the request of Bundesbank President Jens Weidmann the ECB’s Governing Council authorised the disclosure of a number of documents to those to whom the BVerfG’s judgment is directed, namely the Federal Government, which may then share these documents with the Bundestag if necessary. This includes the answers to the 43 questions that the ECB’s Executive Board received as technical expert in the case before the BVerfG.

In late June, German Finance Minister Olaf Scholz and the Bundestag declared that the assessment delivered by the ECB met the requirements outlined in the BVerfG’s ruling, and that therefore the Bundesbank is allowed to continue its participation in the PSPP. Earlier this week, it was reported that a spokesperson from the Bundesbank confirmed that ‘like the German Bundestag and the Federal Government, the Executive Board of the Bundesbank is of the opinion that the requirements of the Federal Constitutional Court in its ruling of 5 May 2020 have been met’.

Although the current state of affairs suggests that the BVerfG’s proportionality-based requirement has succeed in becoming an standard for the ECB and for the German Bundesbank, Bundesregierung and Bundestag, it remains to be seen whether this solution satisfies the BVerfG’s demand that ‘a new decision is taken by the ECB’. Being it so, it is nonetheless likely that proceedings are brought before the BVerfG against the decision by the Bundesregierung and the Bundestag to accept the reinforced proportionality justifications provided by the ECB, as already announced by Peter Gauweiler. Expect the saga to continue. And, in any event, the main underlying legal issue raised by Weiss – namely the primacy of EU law and the Court of Justice’s right to have the final say on EU law matters – remains unsolved.

 

Dolores Utrilla is Associate Professor at the University of Castilla-La Mancha and Assistant Editor at EU Law Live.

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