Between a Rock and a Hard Place: The European Central Bank's struggles between two courts of justice.

• Author: Issing, Otmar

On May 5, 2020, the German Constitutional Court decided that in executing its Public Sector Purchase Programme--quantitative easing--the European Central Bank may have transgressed its mandate by conducting its own economic policy and not respecting the proportionality of the measures taken. The GCC ruled that the contradictory decision taken by the European Court of Justice was incomprehensible and not valid. The ruling concerning the legality of the policy of the ECB has dropped like a bombshell. As expected, there are widely differing opinions on the grounds for the ruling and its consequences.

On one side is the "European view," expressed by representatives of European institutions such as the European Court of Justice, the Commission, and the European Parliament along with numerous commentators in academia and the media. In a nutshell: as a European institution, the ECB is subject only to the jurisdiction of the European Court of Justice, and the GCC ultimately lacks any authority to pass judgment.

At the other end of the spectrum, the "German view" sees the ruling as a long-awaited success, following previous failed efforts, reflecting (predominantly, but not exclusively) German ideas about stability-oriented monetary policy.

The matter is likely to be debated by the lawyers for a long time to come. From an economic point of view, specifically from the perspective of the ECB as the institution responsible for the single monetary policy in the euro area, there can be no winners in this debate. The conflict between the European Court of Justice and the GCC plunges the European Monetary Union into a crisis that could drag on for a considerable time, with the outcome still open.

According to the Treaty of the European Union, the primary objective of the ECB is to maintain price stability and, without prejudice to this objective, to support the general economic policies in the Community. To enable the ECB to carry out its mandate without being influenced by political organs, the Treaty grants the ECB independence.

Ultimately, an independent central bank is not obliged to justify its policy in a legal sense. The only question to be legally clarified is whether an independent central bank is acting within the scope of its legal mandate or exceeding this mandate. Transparency, explanation of monetary policy, yes; justification before the courts, never. As stated above, the ECB, while maintaining price stability, must support the general...