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Noonan welcomes referral of ECB scheme to EU court

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European Central Bank president Mario Draghi

European Central Bank president Mario Draghi

REUTERS

European Central Bank president Mario Draghi

FINANCE Minister Michael Noonan has welcomed a decision to refer a complaint about the European Central Bank's main bond-purchasing programme from Germany to the European Court.

He said the policy would now be judged against overall European law, rather than under the laws of one member state.

The case had originally been taken by Germany's own central bank, the Bundesbank, which had challenged the legality of the scheme, despite being one of the then 17 members represented on the ECB's board.

Now, the German Constitutional Court has referred the outright monetary transactions (OMT) scheme to the European Court, saying that there were reasons to believe that it "exceeds the ECB's monetary policy mandate".

The OMT plan would involve using the ECB's huge purchasing power to support European markets by buying up bonds. It has never been put into effect.

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ECB president Mario Draghi's announcement of OMT in September 2012 played a major role in stabilising the euro area, Mr Noonan said.

However, Germany's constitutional court said yesterday that the scheme may violate the prohibition of monetary financing – or direct lending by the Central Bank to governments.

But, if the OMT decision was "interpreted restrictively" it may be found to comply with the law, the court said.

The German Constitutional Court has become a regular venue to test aspects of the policy response to the financial crisis, although to date there has been little actual impact on implementation.

The court will rule on the legality of a second pillar of eurozone rescue strategy, the European Stability Mechanism, on March 18.

The euro weakened against world currencies yesterday, partly in response to the latest uncertainty surrounding OMT.

Irish Independent