OMT’s Inevitable Legality?

Two sets of considerations on the Advocate General’s Opinion delivered on 14 January 2015 in Case C-62/14, Gauweiler et al v Deutscher Bundestag.
1. Inevitable legality

The first starts from the premise that there are certain cases when a court cannot but give one kind of answer. This can be grounded in cynicism: judges may tolerate condemnation by the Financial Times when they wreck actuarial practices (Test Achats) or Daily Mail headlines when they extend rights (pick your case); but judges won’t render a judgment that causes real havoc, which may well follow if they were to rule on OMT’s illegality. Or you can ground it on the basis that the court cannot damage the entire architecture of the legal system upon which it rests. The first judicial instinct has to be self-preservation. Much like in Pringle then the court in OMT cannot but say: yes this stuff is legal. So, reasoning backwards from the premise that this is the answer, here is how one can read the four planks of the Opinion:

(a) An odd preliminary ruling request (paragraphs 30 to 69)
Paragraph 49 is an exercise in diplomacy, a quick translation is: this national court wants the ECJ’s view even if it tells me that it can disregard what the ECJ says. But the ECJ can’t not hear the case because this would be too risky. So you wriggle out of the logical conclusion that this is not a proper request and you say we ‘trust the national court… to accept [our] answer as decisive.’ (paragraph 67)
(b) Admissibility (paragraphs 70-91)
How can you challenge a press release? Recall, OMT was announced but not implemented. But again, you cannot risk not hearing this case so it has to be admissible. Thus, in this context you say that ‘public communication’ is important for the implementation of monetary policy.’ (paragraph 73) and this is proven by the impact that the announcement still has today (paragraph 84, last sentence). Therefore public communication is an instrument of monetary policy (paragrah 86) and so we can review its legality.
(c) Is OMT really monetary policy? (paragraphs 92-202)
Monetary policy is conducted by a set of instruments that lead to price stability. However the conventional instruments may be impaired by exogenous factors. In this case, the AG says that the ECB can use ‘unconventional’ monetary policy measures to ensure that the conventional monetary instruments work. Under three conditions: (1) the instrument must aim to deliver price stability; (2) it takes the form of an instrument in the Treaties; (3) it must comply with fiscal discipline. But (to use antitrust jargon) ancillary measures are also allowed: ‘isolated economic policy aspects’ taken by the ECB are OK if they support the economic policy measures & are subordinate to the ECB’s objective. (paragraph 132)
But, having said that, OMT can only be described as monetary policy if there is ‘functional distance’ between it and the ESM’s financial assistance programmes (150). This gives something to the opponents by making the formalistic dividing line between monetary and economic policy look tidier: the ECB is not bond-buying to supplement the rescue package.
Moreover, when a specific OMT policy is implemented the ECB will have to establish the reasons for using unconventional monetary policy & a template for what is needed is fixed at paragraph 167. This is so that a court can test the proportionality of the measure at stake. I may be missing something but then if proportionality is only to be assessed later, why do we have an examination of it now starting at para 170? Perhaps this is just to help everyone understand how the test is to be done. One quick reading of this discussion is this: yes OMT means that the ECB is taking a risk, but it has to show it is a calculated risk without at the same time making financial markets fearful of the policy’s success. Thus the OMT purchases cannot give the ECB preferred creditor status, and there can be no ex ante limit to purchases, otherwise the ECB is factually unable to do ‘whatever it takes’ to save the Euro.
(d) Is OMT a bail-out of a member State? (paragraphs 204 to 262)
As with Pringle, there is plenty of wriggle room even when a Treaty Article seems very tightly drawn: the ECB can buy bonds on secondary markets provided there are safeguards to ensure it stays within the rules. Here again something for the objectors: the timing of the purchase must be such that it looks like a price in the secondary market has been fixed. Yes, buying these bonds will trigger interests of investors in the primary market – but is this not a good thing?
Bottom line: the ECJ has to hear the case and cannot dismiss it on procedural grounds; the ECJ has to say OMT is lawful but it can give something to the objectors by tidying up the procedures by which the ECB exercises its powers.
2. Beyond OMT
There are obviously many big issues at play in the case, let me focus on one: does it really make sense to challenge the legality of the ECB’s measures? Given that the courts have to support these initiatives lest the entire edifice crumbles, it is not as if they can really offer a counterpoint to whatever it is that critics think is lacking when the ECB tries to rescue the financial system. The best you can hope for are some procedural safeguards, as proposed here, which maintain the effectiveness of the proposed programme while trying to put some limits which cannot however frustrate the thrust of the policy.
I am not saying that the ECB should receive a blank cheque, rather that we don’t need litigation to deter the ECB from taking steps that are ultra vires. The ECB is ‘deterred’ by the way the economy responds to its signals. Juxtaposing to this kind of output legitimacy some sort of input legitimacy based on the domestic constitutional settlement in one or more Member States does not strike me as the correct dialectic that moves anyone, markets or citizens, forward. This beautifully written Opinion adds further nuance to national and European constitutional law discourse, but its market impact (see Switzerland’s reaction) is as much a signal as the ECB’s press release. Who is it that wants courts to act as signalmen to markets?

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