German Supreme Court doubts some aspects
12 / May / 20 Visitors: 36 ★★★★★
German Supreme Court doubts some aspects of ECB's ambitious purchasing program
Washington insists that the EU should be involved in an international investigation into China's behaviour in discovering the new coronavirus and the origins of the pandemic.
Brussels is trying to avoid taking sides in this fight between Beijing and Washington.
Unwilling to quarrel with either China or the U.S., the EU initially proposed an international inquiry that would help make the overall response to the pandemic better in the future. This EU proposal was the first draft resolution that WHO could adopt later in May.
The proposal did not take into account U.S. demands to investigate the source of infection. Beijing is against this approach, and Washington wants to shift responsibility for its behavior during a pandemic to China. The EU proposal does not place the blame on any one country, and it will be accepted only after the acute phase of the crisis is over.
A spokesman for the US State Department said on Tuesday that "we expect our allies and partners, together with the United States, to ask difficult questions to China, as well as to WHO, to prevent such uncontrolled outbreaks in the future.
Federal Reserve Deputy Chairman Richard Clarida said on Tuesday that he expects the economy to recover from the pandemic-induced crisis in the second half of the year.
Two other central bank managers had previously made the same assumptions.
"We are experiencing the worst contraction in activity and the strongest increase in unemployment in our lives," Clarida told CNBC. - We're not dealing with an ordinary recession. "The contraction will be very, very strong in Q2, "but the recovery may start in the second half of the year.
According to Clarida, the trajectory of the economy will determine the coronavirus and the success of efforts to minimize or eliminate the threat of infection. He also said the Fed is doing everything it can to help the economy through the crisis.
"We are using the full range of our tools, our rates, benchmarks and lending programs to support the economy at this time and we think the actions we are taking will be very important to ensure the strongest recovery," Clarida said.
The German Constitutional Court requires a justification for the ECB bond purchase program.
The German Supreme Court has questioned some aspects of the ambitious bond purchase program launched by the European Central Bank five years ago. The court ruled that the Bundesbank must complete its participation in the program within three months if the ECB cannot prove that its actions are in line with its goals.
The court has questions about the instruments and tactics that the ECB is using to preserve the unity of the eurozone and ensure the growth of the region's economy. It may limit the ability of the central bank to resort to buying bonds to deal with the economic consequences of the coronavirus pandemic.
The yields on Italian government bonds rose by court order.
The ruling of the German Federal Constitutional Court, presented on Tuesday, criticized the German government for not thinking about the consequences of the bond buying program launched by the ECB in 2015, also known as quantitative easing.
The court said that the program does not violate the law prohibiting the central bank from financing regional governments, but that it has negative side effects by damaging savings and keeping unviable companies afloat.
The German government and parliament should have questioned whether the bond purchase program was in line with their goals.
"The longer this program is implemented and the more it grows, the higher the risk that the ECB will become dependent on the policies of the countries in the region, as it will not be able to simply complete this program without threatening the stability of the monetary union," the court ruling says.
This is the last of a number of lawsuits filed with the German Supreme Court. They show deep mistrust between the eurozone central bank and Germany, which is the largest economy in the region.
So far, the German court has sided with the ECB, sometimes directing a number of questions to the EU supreme court in Luxembourg.
On Tuesday, the German Constitutional Court criticized the ruling of the EU Court of 2018, which recognized the legality of bond purchases, noting that the ruling did not take into account the economic consequences of the program.