With one court decision, Germany may be plunging EU into a crisis

The German court invalidated an earlier ECJ ruling upholding the ECB’s action, saying that it does not have effects in Germany. Video: Euro zone set for record recession (Reuters) From this perspective, the German court’s decision didn’t just open Pandora’s box, it ripped the lid off and smashed it to bits. The decision concerned central bank policymaking The case before the German court involved the ECB’s monetary strategy of quantitative easing, which has seen it purchase over 2 trillion euros of government bonds and other debt securities. The legality of the ECB’s QE program had been challenged by ultraconservative members of the Alternative for Germany (AfD) party, and rejected by the ECJ in a December 2018 judgment. Unhappy with that, the German court decided to take the matter into its own hands and review the ECJ judgment, to assess whether the ECB had acted within the limits of the mandate set by the E.U. In its sweeping judgment the German court ruled that the ECJ was wrong, and declared that the German Central Bank (the Bundesbank) would have to cease participating in the ECB’s QE program in three months, unless the ECB’s Governing Council adopted a new decision demonstrating “in a comprehensible and substantiated manner” that the monetary policy goals pursued by QE were “notdisproportionate to the economic and fiscal policy effects.” The ruling could create a constitutional crisis The German court and the ECJ have been engaged in a judicial version of guerrilla warfare for decades, fighting over the supremacy of E.U. With this ruling, the German court crossed the Rubicon and for the first time nullified an action by a E.U. The political ramifications are very serious Over the next three months, the ECB may try to calm things down by offering a better justification of its program, so that the institutions of European monetary union can still wobble along. However, it is not clear that the ECB can offer a more convincing justification than the detailed one it already provided the ECJ to justify QE. Furthermore, if the German court’s problem isthat QE has fiscal consequences, it is unlikely that any justification can address its concerns. Gallery: Minimalism could save you thousands of dollars—here’s how (Espresso) The judgment may lead to an immediate constitutional crisis in Germany, if elected politicians dissent from a court decision that potentially unravels the European monetary union that successive governments have backed for decades. A seeminglytechnicalruling may undermine the legal order that holds the entire European Union together.