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16 February 2016

Reuters: ECB back in court as German group seek to curb its power

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The European Central Bank returned to Germany's constitutional court to defend an emergency plan made at the height of the economic crisis in a long-running legal battle with a group of Germans who want to curb its power to act.

In the court hearing, Yves Mersch, who sits on the ECB's executive board at the center of policymaking, reasserted the bank's autonomy, defending the OMT bond-buying scheme created in 2012 but never used.

"The European Central Bank's Governing Council must be able to decide independently on future monetary policy, in order to fulfill its duty of maintaining price stability in the euro area," Mersch told the court.

Judges in the court will make a final ruling later this year.

Any outright rejection of Mersch's argument, which is not likely, could, for instance, make it hard for Germany's Bundesbank to participate in ECB bond buying - a major part of the central bank's policy arsenal.

Mersch played down German fears that there was a risk of Berlin having to recapitalize the Bundesbank if it were to suffer losses. He conceded, however, that there could be need for such an injection if a central bank's capital was too thin for too long.

Such a step would also prompt a conflict between Europe's top court, which has earlier backed the ECB, and the judges of its most powerful country.

The program was launched at the height of the euro zone debt crisis, shortly after ECB President Mario Draghi said the ECB would do "whatever it takes" to prevent the collapse of the currency.

Full article

© Reuters

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