On Tuesday, the German constitutional court delivered a withering verdict on the governance around decisions of the European Central Bank (ECB) and the Eurosystem of national central banks over the public sector purchase programme (PSPP).
This programme was established in 2015, with ECB policy rates then already at the zero bound, to buy eurozone sovereign bonds and so provide further monetary stimulus to ward off dreaded deflation.
The programme kicked off modestly enough on March 9, 2015, with the initial purchase of €3.2 billion of bonds and a monthly target of around €60 billion.
Allegations that this constituted outright financing of sovereigns by the ECB – even though it buys bonds in the secondary market – were immediate and have rumbled through the courts ever since, with a finding from the European Court of Justice in 2018 that the PSPP was actually perfectly fine, thank you.
One of the hardest things we had to fight was to get central banks out of the vicious cycle of financing governments - Former Bundesbanker
By the time the German constitutional court delivered its recent judgment, the PSPP had grown to holdings of €2.189
