Banking news

ECB has proven that its purchases are proportionate, says Olaf Scholz

BERLIN ( – The European Central Bank (ECB) has respected the principle of proportionality in implementing its main credit support program, says German finance minister Olaf Scholz in a letter to the President of the Bundestag, the lower house of parliament.

This letter is supposed to help remove the uncertainties about the future of the ECB’s quantitative easing (QE) strategy, which consists of massively buying bonds on the financial markets with the aim of ensuring the maintenance of very low interest rates.

The German Constitutional Court ruled in early May that the Public Sector Purchasing Program (PSPP) exceeded the ECB’s mandate and ordered the Bundesbank, the German central bank, to cease participating in it if it fails to establish the proportionate nature of the transactions concerned within three months.

This decision rekindled doubts about the independence of the ECB and the competence of national courts over its decisions.

In his letter dated June 26, which was able to read, Olaf Scholz wrote: “The Federal Minister of Finance is convinced that the ECB Council (…) has shown plausible proportionality regarding the PSPP. “

He adds that his ministry has had multiple discussions with the ECB and the Bundesbank in recent weeks and concludes: “From our point of view, the Bundesbank is allowed to participate in the implementation and enforcement of the challenged PSPP resolutions in the future.”

The Bundestag deputies also consider that the ECB has respected the criteria required by the Constitutional Court with regard to the proportionality of its program.

Conservative and Social Democratic parliamentary groups, as well as opposition, liberal and Greens groups, state in a draft declaration: “The German Bundestag considers plausible the presentation by the ECB on the implementation of an assessment of proportionality and (considers) that the requirements of the judgment rendered on May 5, 2020 by the (Constitutional Court) are therefore met “.

(Andreas Rinke, French version Marc Angrand, edited by Jean-Michel Bélot)