The Express, May 12th
The landmark legal challenge to the European Central Bank being mounted by a German court is an indication national courts trump the ECJ – and marks a “crunch point” for the bloc, a UK-based expert in financial law has said.
And Barney Reynolds, a leading UK and international financial services lawyer and a partner at Shearman and Sterling LLP, said the move underlined the deep and widening divisions between countries in the north of Europe, such as Germany and the Netherlands, and those in the south, such as Italy, which has been particularly badly hit by COVID-19, leaving the bloc facing a “critical moment”. Plaintiffs including former MEP Hans-Olaf Henkel had initiated the case, at Germany’s constitutional court, based in Karlsruhe, last week in which they argued the Public Sector Purchase Programme (PSPP), the mechanism by which the ECB is attempting to mitigating the impact of the coronavirus pandemic by purchasing private and public sector securities to the tune of £657billion (750 billion euros), represented direct financing of governments.
The court did not find proof of direct sovereign financing – but did conclude the German government had failed to adequately scrutinise the objectives and mechanisms of the scheme – a verdict Mr Henkel later described as a “declaration of war” against the ECB.
Mr Reynolds, who has previously issued warnings about the way the eurozone operates, told Express.co.uk: “Germany is essentially saying it has delegated certain powers to the EU, but that it controls how the EU operates within those powers – so as to ensure the EU doesn’t overreach.
“Meanwhile, the ECJ asserts that it, alone, is the arbiter of whether the EU is operating within its powers and that the German constitutional court can play no role in the issue.”The ECJ did not regard as the German court’s decision – essentially that the set-up of the EU comprises a delegation of power from member states which members can continue to oversee – as correct, Mr Reynolds pointed out, instead seeing it as an autonomous legal order which they determine the scope of.
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