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Translation C-493/17 - 1

Case C-493/17

Request for a preliminary ruling

Date lodged:

15 August 2017

Referring court:

Bundesverfassungsgericht (Germany)

Date of the decision to refer:

18 July 2017

Applellants:

Heinrich Weiss and Others

Respondents:

Federal Government and Others

BUNDESVERFASSUNGSGERICHT

[…]

In the proceedings

concerning

the constitutional complaints of

I. 1. Dr. Heinrich W e i s s, […] Düsseldorf,

2. Dr. Jürgen H e r a e u s, […] Hanau,

3. Dr. Patrick A d e n a u e r, […] Cologne,

[…]

against

EN

REQUEST FOR A PRELIMINARY RULING 18. 7. 2017 — CASE C-493/17

2

1. the failure by the Bundestag (Federal Parliament) and

Bundesregierung (Federal Government) to work to achieve the

annulment or non-implementation of

– the Decision of the Council of the European Central Bank

of 4 September 2014 on the asset-backed securities

purchase programme (ECB/2014/45) and the Decision of

the European Central Bank on this programme of 19

November (Decision (EU) 2015/5 of 19 November 2014),

as amended by the Decision of the European Central Bank

of 10 September 2015 (Decision (EU) 2015/1613), [Or. 2]


of 15 October 2014 on the implementation of the third

covered bond purchase programme (ECB/2014/40),


of 22 January 2015 on an expanded programme for the

purchase of assets (ECB/2015/10) and the Decision of the

European Central Bank of 4 March 2015 (Decision (EU)

2015/774) on a secondary markets public sector asset

purchase programme (Public Sector Asset Purchase

Programme), as amended by the Decision of the European

Central Bank of 5 November 2015 (Decision (EU)

2015/2101), Decision of the European Central Bank of 16

December 2015 (Decision (EU) 2015/2464) and Decision

of the European Central Bank of 18 April 2016 (Decision

(EU) 2016/702),


of 10 March 2016 (Decision (EU) 2016/16) and the

Decision of the European Central Bank and the Decision of

the European Central Bank of 1 June 2016 (Decision (EU)

2016/948) on a corporate sector purchase programme —

CSPP),

2. the failure of the Deutsche Bundesbank to resist its inclusion in

the purchase programme of the European Central Bank by means

of an action before the Court of Justice of the European Union

– 2 BvR 859/15 –,

II 1. Prof. Dr. Bernd L u c k e, […] Winsen,

2. Prof. Dr. h.c. Hans-Olaf H e n k e l, […] Berlin,

3. Prof. Dr. Joachim S t a r b a t t y, […] Tübingen,

WEISS AND OTHERS

3

4. Mr Bernd K ö l m e l, […] Ötigheim,

5. Ms Ulrike T r e b e s i u s, […] Horst,

and a further 1729 complainants [Or. 3]

[…]

1. [...]

2. [...]

against

1. the applicability in the Federal Republic of Germany of

a) the Decisions of the Council of the European Central Bank of 22

January 2015 and Decision (EU) 2015/774 of the European

Central Bank of 4 March 2015 (ECB/2015/10) on a secondary

markets public sector asset purchase programme (Public Sector

Asset Purchase Programme — PSPP), together with

– Decision (EU) 2015/2101 of the European Central Bank of

3 September/5 November 2015 (ECB/2015/33) amending

Decision (EU) 2015/774 (ECB/2015/10) on a secondary

markets public sector asset purchase programme,


3 December/16 December 2015 (ECB/2015/48) amending

Decision (EU) 2015/774 (ECB/2015/10) on a secondary

markets public sector asset purchase programme,


10 March/18 April 2016 (ECB/2016/8) amending Decision

(EU) 2015/774 (ECB/2015/10) on a secondary markets

public sector asset purchase programme,

b) the Decisions of the Council of the European Central Bank of 4

September and 2 October 2014 and Decision (EU) 2015/5 [Or.

4] of the European Central Bank of 19 November 2014

(ECB/2014/45) on the initiation and implementation of the asset-

backed securities purchase programme (Asset-Backed Securities

Purchase Programme — ABSPP), together with


10 September 2015 (ECB/2015/31) amending Decision

(EU) 2015/5 (ECB/2014/45) on the implementation of the

asset-backed securities purchase programme,


4

c) the Decisions of the Council of the European Central Bank of 4

September 2014 and 2 October 2014 and of the Decision of the

European Central Bank of 15 October 2014 (ECB/2014/40) on

the initiation and implementation of the third covered bond

purchase programme (Third Covered Bond Purchase

Programme — CBPP3),

d) the Decisions of the Council of the European Central Bank of 10

March/21 April 2016 and the Decision (EU) 2016/948 of the

European Central Bank of 1 June 2016 (ECB/2016/16) on the

implementation of the corporate sector purchase programme

(Corporate Sector Purchase Programme — CSPP),

2. the participation of the Deutsche Bundesbank in the implementation of

the Decisions to purchase assets referred to in 1(a) to (d) above,

3. the failure of the Federal Government and the German Bundestag to

work actively to achieve the annulment of the Decisions referred to in

1(a) to (d) above to purchase assets and to take appropriate measures to

ensure that the domestic burdens from the continued implementation

of those decisions is limited as far as possible,

– 2 BvR 1651/15 –,

III. Dr. Peter G a u w e i l e r, [...] Munich,

[...]

against

the Federal Government’s failure to act with regard to the Asset

Purchase Programme (APP) of the European Central Bank and with

regard to the partiality displayed by the organs of the European Central

Bank

– 2 BvR 2006/15 –,

[Or. 5]

IV 1. Prof. Dr. Johann Heinrich v o n S t e i n, [...] Stuttgart,

2. Prof. Dr. Gunnar H e i n s o h n, [...] Gdańsk, Poland,

3. Mr Otto M i c h e i s, [...] Gütersloh,

4. Mr Reinhold v o n E b e n — W o r l é e, [...] Hamburg,

5. Dr. Michael G ö d e, [...] Aschaffenburg,

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6. Ms Dagmar M e t z g e r, [...] Munich,

7. Dr. Karl-Heinz H a u p t m a n n, [...] Gelnhausen,

8. Dr. Stefan S t ä d t e r, [...] Luxembourg,

9. Prof. Dr. Markus C. K e r b e r, [...] Berlin,

[...]

against

1. the Public Sector Purchase Programme (PSPP) announced by the

European Central Bank on 22 January 2015, by Decision (EU)

2015/774 of the European Central Bank of 4 March 2015, which

entered into force on 15 May 2015, on a secondary markets public

sector assets purchase programme (ECB/2015/10) and the extensions

thereto decided on 3 December 2015 and 10 March 2016 and made

more specific on 21 April,

2. the participation of the Deutsche Bundesbank in the implementation of

the Public Sector Purchase Programme (PSPP) of the European

Central Bank, in particular by the Decisions of the European Central

Bank of 3 December 2015, 10 March 2016 and 21 April 2016,

3. the inactivity of the Federal Government with regard to the Public

Sector Purchase Programme (PSPP) of the European Central Bank, in

particular its extension through the Decisions of the European Central

Bank of 3 December 2015, 10 March 2016 and 21 April 2016 [Or. 6]

And an application of 24 May 2017 for the issue of an interim injunction,

– 2 BvR 980/16 –

the Bundesverfassungsgericht (Federal Constitutional Court) — Second Senate —

[...]

decided as follows on 18 July 2017:

I. The proceedings are stayed.

II. Pursuant to Article 19(3)(b) of the Treaty on the European Union and points

(a) and (b) of the first paragraph of Article 267 of the Treaty on the

Functioning of the European Union, the following questions are referred to

the Court of Justice of the European Union for a preliminary ruling:

1. Does Decision (EU) 2015/774 of the European Central Bank of 4

March 2015 on a secondary markets public sector asset purchase


6

programme (ECB/2015/10), as amended by Decision (EU) 2015/2101

of the European Central Bank of 5 November 2015 amending Decision

(EU) 2015/774 on a secondary markets public sector asset purchase

programme (ECB/2015/33), Decision (EU) 2016/702 [Or. 7] of the

European Central Bank of 18 April 2016 amending Decision (EU)

2015/774 on a secondary markets public sector asset purchase

programme (ECB/2016/8) and Decision (EU) 2016/1041 of the

European Central Bank of 22 June 2016 on the eligibility of

marketable debt instruments issued or fully guaranteed by the Hellenic

Republic and repealing Decision (EU) 2015/300 (ECB/2016/18), or

the method of its implementation, infringe Article 123(1) of the Treaty

on the Functioning of the European Union?

Does it infringe Article 123(1) of the Treaty on the Functioning of the

European Union in particular if in the course of the public sector asset

purchase programme (PSPP)

a) details of the purchases are communicated in a way that creates

de facto certainty on the markets that the Eurosystem will

purchase part of the bonds to be issued by the Member States?

b) even after the event no details are given about compliance with

minimum periods between the issue of a debt instrument on the

primary market and its purchase on the secondary market, with

the result that a review by the courts is not possible in that

regard? [Or. 8]

c) all bonds purchased are not resold but held until maturity and

thus withdrawn from the market?

d) the Eurosystem purchases marketable debt instruments with a

negative yield at maturity?

2. Does the Decision referred to in 1 above then infringe Article 123

TFEU in any event if, in view of changes in conditions on the finance

markets, in particular as a result of a shortage of bonds available for

purchase, its continued implementation requires a continual loosening

of the originally agreed purchase rules and the restrictions laid down in

the case-law of the Court of Justice for a bond purchase programme,

such as the PSPP represents, lose their effect?

3. Does the current version of Decision (EU) 2015/774 of the European

Central Bank of 4 March 2015, referred to in 1 above, infringe Article

119 and Article 127(1) and (2) of the Treaty on the Functioning of the

European Union and Articles 17 to 24 of the Protocol on the Statute of

the European System of Central Banks and of the European Central

Bank because it exceeds the monetary policy mandate of the European

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7

Central Bank laid down in those provisions and for that reason

encroaches upon the competence of the Member States?

Is the mandate of the European Central Bank exceeded in particular as

a result of the fact that [Or. 9]

a) on the basis of the volume of the PSPP, which amounted to EUR

1 534.8 billion on 12 May 2017, the Decision referred to in 1

above materially influences the refinancing terms of the Member

States?

b) in view of the improvement in the refinancing terms of the

Member States referred to in (a) above and their effect on the

commercial banks, the Decision referred to in 1 above has not

only indirect economic policy consequences but its objectively

ascertainable effects suggest that an economic policy aim of the

programme is at least of equal priority as the monetary policy

aim?

c) on account of its powerful economic policy effects, the Decision

referred to in 1 above infringes the principle of proportionality?

d) in the absence of a specific statement of reasons during the

period of more than two years of implementation, it is not

possible to examine whether the Decision referred to in 1 above

is still necessary and proportionate?

4. Does the Decision referred to in 1 above infringe Article 119 and

Article 127(1) and (2) TFEU and Articles 17 to 24 of the Protocol on

the Statute of the European System of Central Banks and of the

European Central Bank in any event because its volume and

implementation period of more than two years and the [Or. 10]

resulting economic policy effects give grounds for a different view of

the need for and proportionality of the PSPP and consequently, from a

certain point in time, it exceeds the economic policy mandate of the

European Central Bank?

5. Does the unlimited sharing of risks between the national central banks

of the Eurosystem that may be provided for under the Decision

referred to in 1 above, in the event of the non-repayment of bonds of

the central governments and of equivalent issuers infringe Article 123

and Article 125 of the Treaty on the Functioning of the European

Union and Article 4(2) of the Treaty on European Union, if as a result

it may be necessary for national central banks to be recapitalised using

budget funds?

III Having regard to the application for an interim injunction by the

complainants at IV above, the Senate requests that the case be determined


8

pursuant to the expedited procedure under Article 105 of the Rules of

Procedure of the Court of Justice of the European Union. [Or. 11]

Grounds:

A. Facts

1 The complainants at I to IV claim, by way of their constitutional complaints, [...]

inter alia that the European System of Central Banks, through its launching of the

Public Sector Purchase Programme (PSPP), which is a sub-programme of the

Expanded Asset Purchase Programme (EAPP), infringes the prohibition of

monetary financing of States enshrined in Article 123 TFEU and the principle of

conferral under Article 5(1) TEU in conjunction with Articles 119 and Article 127

et seq. TFEU. For that reason, they claim, the Deutsche Bundesbank may not

participate in that programme and the German Bundestag (Federal Parliament)

and the Federal Government are obliged to take appropriate measures against the

EAPP. The complainants at IV claim moreover that the EAPP infringes the right

of the German Bundestag to decide on the budget.

2 On 24 May 2017 the complainants at IV also lodged an application for an interim

injunction prohibiting the Deutsche Bundesbank from continuing to participate in

the EAPP and requiring the Federal Government to bring an action before the

Court of Justice of the European Union challenging the PSPP and the Corporate

Sector Purchase Programme (CSPP) of the ECB.

I. Subject matter of the proceedings

1. Expanded Asset Purchase Programme (EAPP)

3 The EAPP is a framework programme of the European Central Bank (ECB),

which consists of four sub-programmes: the Third Covered Bond Purchase

Programme (CBPP3), the Asset-Backed Securities Purchase

Programme (ABSPP), the Public Sector Purchase Programme (PSPP) and the

CSPP. [Or. 12]

(a) Aim of the EAPP

4 The EAPP was introduced through a Decision of the Council of the European

Central Bank (Council of the ECB), which was not however published. According

to the Press Release of 22 January 2015, the content of this Decision is limited to

combning the CBPP3 and ABSPP programmes that had already been launched,

the announcement of the PSPP, which was subsequently decided upon in March

2015, and the establishment of certain technical features of the three sub-

programmes (Cf. ECB, Press Release of 22 January 2015; cf. also recital 3 of

Decision (EU) 2015/774 of the European Central Bank of 4 March 2015 on a

secondary markets public sector asset purchase programme (ECB/2015/10) OJ L

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121 of 14 May 2015, p. 20 (‘the PSPP Decision of 4 March 2015’). The fourth

sub-programme, CSPP, was decided upon only in March 2016.

5 It is also apparent from the Press Release of 22 January 2015 that the EAPP is

intended to meet the mandated objective of securing price stability: it eases

monetary and financial conditions so that firms and households have cheaper

access to finance. This promotes investment and consumption and ultimately

contributes to a return of inflation at a rate towards 2%. The Press Release is

worded as follows:

ECB announces expanded asset purchase programme

- ECB expands purchases to include bonds issued by euro area central

governments, agencies and European institutions

- Combined monthly asset purchases to amount to €60 billion

- Purchases intended to be carried out until at least September 2016

- Programme designed to fulfil price stability mandate

The Governing Council of the European Central Bank (ECB) today

announced an expanded asset purchase programme. Aimed at fulfilling the

ECB’s price stability mandate, this programme will see the ECB add the

purchase of sovereign bonds to its existing private sector asset purchase

programmes in order to address the risks of a too prolonged period of low

inflation.

The Governing Council took this decision in a situation in which most

indicators of actual and expected inflation in the euro area had drifted

towards their historical lows. As potential second-round effects on wage and

price-setting threatened [Or. 13] to adversely affect medium-term price

developments, this situation required a forceful monetary policy response.

Asset purchases provide monetary stimulus to the economy in a context

where key ECB interest rates are at their lower bound. They further ease

monetary and financial conditions, making access to finance cheaper for

firms and households. This tends to support investment and consumption,

and ultimately contributes to a return of inflation rates towards 2%.

[…]

The ECB will buy bonds issued by euro area central governments, agencies

and European institutions in the secondary market against central bank

money, which the institutions that sold the securities can use to buy other

assets and extend credit to the real economy. In both cases, this contributes

to an easing of financial conditions.


10

The programme signals the Governing Council’s resolve to meet its

objective of price stability in an unprecedented economic and financial

environment. The instruments deployed are appropriate in the current

circumstances and in full compliance with the EU Treaties.

As regards the additional asset purchases, the Governing Council retains

control over all the design features of the programme and the ECB will

coordinate the purchases, thereby safeguarding the singleness of the

Eurosystem’s monetary policy. The Eurosystem will make use of

decentralised implementation to mobilise its resources. […]

6 An Annex was attached to the Press Release of 22 January 2015, which sets out

further operational modalities of the (until then: three) sub-programmes.

7 In recital 2 of the Decision of 4 March 2015 the ECB summarised the aim of the

EAPP as follows:

[The EAPP] [is] aimed at further enhancing the transmission of monetary

policy, facilitating credit provision to the euro area economy, easing

borrowing conditions of households and firms and contributing to returning

inflation rates to levels closer to 2 %, consistent with the primary objective

of the ECB to maintain price stability.

(b) Development of the EAPP to date

8 The volume and duration announced by the Press Release of 22 January 2015 of

EUR 60 billion per month until at least September 2016 [Or. 14] were later

expanded. On 10 March 2016 the Council of the ECB decided inter alia to expand

the programme then called the Asset Purchase Programme (APP) to a total of

EUR 80 billion per month. This decision has not been published but was

announced in a Press Release on the same day

(https://www.ecb.europa.eu/press/pr/date/2016/html/ pr160310_2.en.html). Those

decisions were confirmed in Decision (EU) 2016/702 of the European Central

Bank of 18 April 2016 amending Decision (EU) 2015/774 on a secondary markets

public sector asset purchase programme (ECB/2016/8), OJ L 121 of 11 May 2016,

p. 24), ‘the Decision of 18 April 2016’), recital 3 of which reproduces the figure

of EUR 80 billion per month. The fact that the purchases would continue until at

least March 2017 was merely announced orally at the press conference on the

Meeting of the Council of the ECB on 10 March 2016 (http://www.ecb.europa.eu

/press/pressconf/2016/html/is160310.en.html). On 8 December 2016 the Council

of the ECB decided to continue the EAPP until at least the end of 2017. From

April 2017 the total volume was again to be EUR 60 billion per month. This

decision too is unpublished, but its basic elements were announced at the press

conference of 8 December 2016. (press conference of 8 December 2016,

https://www.ecb.europa.eu/press /pr/date/2016/html/pr161208.en.html). The

reduction of the monthly purchase volume from EUR 80 to EUR 60 billion was

expressly not to be understood as the beginning of a ‘tapering’ of the EAPP (cf.

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ECB, Introductory statement to the press conference of 8 December 2016,

https://www.ecb.europa.eu/press/pressconf/2016/html/is161208.en.html, answers

to questions six, seven and ten).

9 According to the statements of the ECB, both the amount and the duration of the

programme are flexible. It can be adjusted and should in any event continue until

a sustained correction of the inflation rates that are below but close to the desired

rate of 2% (see most recently the ECB Press Release of 8 December 2016; see

also Deutsche Bundesbank, Monthly Report, June 2016, p. 32; ECB, Press

Release of 21 July 2016; recital 7 of the Decision of 4 March 2015). According to

the Press Release of 8 December 2016, the Council of the ECB also reserves the

right to expand the programme with regard to its volume and/or duration. [Or. 15]

10 The PSPP constitutes by far the major part of the total volume of the EAPP. As at

12 May 2017 the EAPP had a total volume of EUR 1 862.1 billion; of this the

ABSPP accounted for about EUR 23.8 billion, the CBPP3 for EUR 218.6 billion,

the CSPP for EUR 84.9 billion and the PSPP EUR 1 534.6 billion (see Deutsche

Bundesbank, Monthly Report, May 2017, p. 28). On that date the PSPP therefore

had a share of 82.4% of the total volume of the EAPP. The increase in the money

supply is thus achieved predominantly through the purchase of public sector

bonds. At the end of the currently envisaged – provisional – end of the EAPP in

December 2017 the Eurosystem will have purchased securities in the amount of

approximately EUR 2 280 billion.

2. Public Sector Purchase Programme (PSPP) as a sub-programme of the

EAPP

11 In the Press Release of 22 January 2015 which announced the EAPP, (see

paragraph 4 above), the ECB announced at the same time a programme that was

subsequently called the Public Sector Purchase Programme (PSPP). The decision

concerning the announcement has not been published. Formally, the PSPP was

introduced by the Decision of 4 March 2015. It is worded as follows:

DECISION (EU) 2015/774 OF THE EUROPEAN CENTRAL BANK

of 4 March 2015

on a secondary markets public sector asset purchase programme

(ECB/2015/10)

THE GOVERNING COUNCIL OF THE EUROPEAN CENTRAL BANK –

Having regard to the Treaty on the Functioning of the European Union, and

in particular to the first indent of Article 127(2) thereof,

Having regard to the Statute of the European System of Central Banks and

of the European Central Bank, and in particular to the second subparagraph


12

of Article 12.1 in conjunction with the first indent of Article 3.1, and Article

18.1 thereof,

Whereas:

(1) In accordance with Article 18.1 of the Statute of the European System of

Central Banks and of the European Central Bank (hereinafter the ‘Statute of

the ESCB’), the European Central Bank (ECB), together with the national

central banks of the Member States whose currency is the euro (hereinafter

the ‘NCBs’) may operate in the financial markets by, among other things,

buying and selling marketable instruments outright, in order to achieve the

objectives of the ESCB. [Or. 16]

(2) On 4 September 2014, the Governing Council decided to initiate a third

covered bond purchase programme (hereinafter the ‘CBPP3’) and an asset-

backed securities purchase programme (ABSPP). Alongside the targeted

longer-term refinancing operations introduced in September 2014, these

asset purchase programmes are aimed at further enhancing the transmission

of monetary policy, facilitating credit provision to the euro area economy,

easing borrowing conditions of households and firms and contributing to

returning inflation rates to levels closer to 2 %, consistent with the primary

objective of the ECB to maintain price stability.

(3) On 22 January 2015, the Governing Council decided that asset purchases

should be expanded to include a secondary markets public sector asset

purchase programme (hereinafter the ‘PSPP’). Under the PSPP the NCBs, in

proportions reflecting their respective shares in the ECB’s capital key, and

the ECB may purchase outright eligible marketable debt securities from

eligible counterparties on the secondary markets. This decision was taken as

part of the single monetary policy in view of a number of factors that have

materially increased the downside risk to the medium-term outlook on price

developments, thus jeopardising the achievement of the ECB’s primary

objective of maintaining price stability. These factors include lower than

expected monetary stimulus from adopted monetary policy measures, a

downward drift in most indicators of actual and expected euro area inflation

— both headline measures and measures excluding the impact of volatile

components, such as energy and food — towards historical lows, and the

increased potential of second-round effects on wage and price- setting

stemming from a significant decline in oil prices..

(4) The PSPP is a proportionate measure for mitigating the risks to the

outlook on price developments, as it will further ease monetary and financial

conditions, including those relevant to the borrowing conditions of euro area

non-financial corporations and households, thereby supporting aggregate

consumption and investment spending in the euro area and ultimately

contributing to a return of inflation rates to levels below but close to 2 %

over the medium term. In an environment where key ECB interest rates are

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at their lower bound, and purchase programmes focussing on private sector

assets are judged to have provided measurable, but insufficient, scope to

address the prevailing downside risks to price stability, it is necessary to add

to the Eurosystem’s monetary policy measures the PSPP as an instrument

that features a high transmission potential to the real economy. Thanks to its

portfolio re-balancing effect, the sizable purchase volume of the PSPP will

contribute to achieving the underlying monetary policy objective of inducing

financial intermediaries to increase their provision of liquidity [Or. 17] to

the interbank market and credit to the euro area economy.

(5) The PSPP contains a number of safeguards to ensure that the envisaged

purchases will be proportionate to its aims, and that the related financial

risks have been duly taken into account in its design and will be contained

through risk management. To allow for the smooth operation of markets in

eligible marketable debt securities, and to avoid obstructing orderly debt

restructurings, thresholds will apply to the purchases of those securities by

the Eurosystem central banks.

(6) The PSPP complies fully with the obligations of the Eurosystem central

banks under the Treaties, including the monetary financing prohibition, and

does not impair the operation of the Eurosystem in accordance with the

principle of an open market economy with free competition.

(7) In terms of the size of the PSPP, the ABSPP and the CBPP3, the

liquidity provided to the market by the combined monthly purchases will

amount to EUR 60 billion. Purchases are intended to be carried out until the

end of September 2016 and will, in any case, be conducted until the

Governing Council sees a sustained adjustment in the path of inflation which

is consistent with its aim of achieving inflation rates below, but close to, 2 %

over the medium term.

(8) With a view to ensuring the effectiveness of the PSPP, the Eurosystem

hereby clarifies that it accepts the same (pari passu) treatment as private

investors as regards the marketable debt securities that the Eurosystem may

purchase under the PSPP, in accordance with the terms of such instruments.

(9) The purchases of eligible marketable debt instruments by the Eurosystem

under the PSPP should be implemented in a decentralised manner, giving

due regard to market price formation and market functioning considerations,

and coordinated by the ECB, thereby safeguarding the singleness of the

Eurosystem’s monetary policy,

HAS ADOPTED THIS DECISION:

Article 1

Establishment and scope of PSPP


14

The Eurosystem hereby establishes the PSPP under which the Eurosystem

central banks shall purchase eligible marketable debt securities, as defined in

Article 3, on the secondary markets, from eligible counterparties, as defined

in Article 7, under specific conditions. [Or. 18]

Article 2

Definitions

For the purposes of this Decision, the following definitions apply:

(1) ‘Eurosystem central bank’ means the ECB and the national central banks

of the Member States whose currency is the euro (hereinafter the ‘NCBs’);

(2) ‘recognised agency’ means an entity that the Eurosystem has classified

as such for the purpose of the PSPP;

(3) ‘international organisation’ means an entity within the meaning of

Article 118 of Regulation (EU) No 575/2013 of the European Parliament

and of the Council (1) and that the Eurosystem has classified as such for the

purpose of the PSPP;

(4) ‘multilateral development bank’ means an entity within the meaning of

Article 117(2) of Regulation (EU) No 575/2013 and that the Eurosystem has

classified as such for the purpose of the PSPP;

(5) ‘positive outcome of a review’ means the later of the following two

decisions: the decision by the Board of Directors of the European Stability

Mechanism and, in case the International Monetary Fund co-finances the

financial assistance programme, the Executive Board of the International

Monetary Fund to approve the next disbursement under that programme, on

the understanding that both decisions are necessary for the resumption of

purchases under the PSPP.

Lists of the entities referred to in points (2) to (4) are published on the

ECB’s website.

Article 3

Eligibility criteria for marketable debt securities

1. Subject to requirements laid down in this Article, euro-denominated

marketable debt securities issued by central governments of a Member State

whose currency is the euro, recognised agencies located in the euro area,

international organisations located in the euro area and multilateral

development banks located in the euro area shall be eligible for purchases by

the Eurosystem central banks under the PSPP. In exceptional circumstances,

where the envisaged purchase amount cannot be attained, the Governing

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Council may decide to purchase marketable debt securities issued by other

entities located in the euro area, in accordance with the conditions laid down

in paragraph 4. [Or. 19]

2. In order to be eligible for purchases under the PSPP, marketable debt

securities shall comply with the eligibility criteria for marketable assets for

Eurosystem credit operations pursuant to Annex I to Guideline

ECB/2011/14 (1), subject to the following requirements:

(a) the issuer or guarantor of the marketable debt securities shall have a

credit quality assessment of at least Credit Quality Step 3 in the

Eurosystem’s harmonised rating scale expressed in the form of at least one

public credit rating provided by an external credit assessment institution

(ECAI) accepted within the Eurosystem credit assessment framework;

(b) if multiple ECAI issuer or ECAI guarantor ratings are available, the first-

best rule shall apply, i.e. the best available ECAI issuer or guarantor rating

shall apply. If the fulfilment of the credit quality requirements are

established based on an ECAI guarantor rating, the guarantee shall fulfil the

features of an acceptable guarantee as laid down in Section 6.3.2(c)(i) to (iv)

of Annex I to Guideline ECB/2011/14;

(c) if the credit assessment provided by an accepted ECAI for the issuer or

guarantor does not comply with at least Credit Quality Step 3 in the

Eurosystem’s harmonised rating scale, marketable debt securities shall be

eligible only if they are issued or fully guaranteed by the central

governments of euro area Member States under a financial assistance

programme and in respect of which the application of the Eurosystem’s

credit quality threshold is suspended by the Governing Council pursuant to

Article 8 of Guideline ECB/2014/31;

(d) In the event of a review of an ongoing financial assistance programme,

eligibility for PSPP purchases shall be suspended and shall resume only in

the event of a positive outcome of the review.

3. In order to be eligible for purchases under the PSPP, debt securities,

within the meaning of paragraphs 1 to 2, shall have a minimum remaining

maturity of two years and a maximum remaining maturity of 30 years at the

time of their purchase by the relevant Eurosystem central bank. In order to

facilitate smooth implementation, marketable debt instruments with a

remaining maturity of 30 years and 364 days shall be eligible under the

PSPP. National central banks shall also carry out substitute purchases of

marketable debt securities issued by international organisations and

multilateral development banks if the envisaged amounts to be purchased in

marketable debt securities issued by central governments and recognised

agencies cannot be attained.


16

4. Eurosystem central banks may, in exceptional circumstances, propose

to the Governing Council public non- financial corporations located in their

jurisdiction as issuers of marketable debt instruments to be purchased as

substitutes in case the envisaged amount to be purchased in marketable debt

instruments issued by central governments or recognised agencies located in

their jurisdiction cannot be attained. The proposed public non-financial

corporations shall at least fulfil both of the following criteria: [Or. 20]

– be a ‘non-financial corporation’ as defined in Regulation (EU) No

549/2013 of the European Parliament and of the Council;

– be a ‘public sector’ entity, meaning an entity within the meaning of

Article 3 of Council Regulation (EC) No 3603/93.

Following approval by the Governing Council, euro-denominated

marketable debt instruments issued by such public non-financial

corporations located in the euro area which comply with (i) the eligibility

criteria for marketable assets as collateral for Eurosystem credit operations,

as per Section 6.2.1 of Annex I to Guideline ECB/2011/14; and (ii) the

requirements in paragraphs 2 and 3 shall be eligible for purchases as

substitutes under the PSPP.

5. In principle, purchases of nominal marketable debt instruments at a

negative yield to maturity (or yield to worst) above the deposit facility rate

are permissible.

Artikel 4

Limitations on the execution of purchases

1. To permit the formation of a market price for eligible securities, no

purchases shall be permitted in a newly issued or tapped security and the

marketable debt instruments with a remaining maturity that are close in time,

before and after, to the maturity of the marketable debt instruments to be

issued, over a period to be determined by the Governing Council (‘blackout

period’). For syndications, the blackout period in question is to be respected

on a best effort basis before the issuance.

2. For debt securities issued or fully guaranteed by the central

governments of euro area Member States under a financial assistance

programme, the period of purchases under the PSPP after a positive outcome

of each programme review shall, as a rule, be limited to two months, unless

there are exceptional circumstances justifying a suspension of purchases

before or a continuation of purchases after such period and until the start of

the next review.

Artikel 5

WEISS AND OTHERS

17

Purchase limits

1. Subject to Article 3, an issue share limit per international securities

identification number shall apply under the PSPP to marketable debt

securities fulfilling the criteria laid down in Article 3, after consolidating

holdings in all of the portfolios of the Eurosystem central banks. The limit

will initially be set at 25 %, for the first six months of purchases and

subsequently reviewed by the Governing Council.

2. In case of debt securities referred to in Article 3(2)(c), a different issue

share limit will apply. [Or. 21]

3. Under the PSPP, an aggregate limit of 33 % of an issuer’s outstanding

securities shall apply to all eligible marketable debt securities in respect of

the maturities defined in Article 3, after consolidating holdings in all of the

portfolios of the Eurosystem central banks..

Article 6

Allocation of portfolios

1. Of the total value of purchased marketable debt securities eligible

under PSPP, 12 % shall be purchased in securities issued by eligible

international organisations and multilateral development banks, and 88 %

shall be purchased in securities issued by eligible central governments and

recognised agencies. This allocation is subject to revision by the Governing

Council. Purchases in debt securities issued by eligible international

organisations and multilateral development banks shall be conducted by

NCBs only.

2. The NCBs’ share of the total market value of purchases of marketable

debt securities eligible under PSPP shall be 92 %, and the remaining 8 %

shall be purchased by the ECB. The distribution of purchases across

jurisdictions shall be according to the key for subscription of the ECB’s

capital as referred to in Article 29 of the Statute of the ESCB.

3. Eurosystem central banks shall apply a specialisation scheme for the

allocation of marketable debt securities to be purchased under the PSPP. The

Governing Council shall allow for ad hoc deviations from the specialisation

scheme should objective considerations obstruct the achievement of the said

scheme or otherwise render deviations advisable in the interests of attaining

the overall monetary policy objectives of the PSPP. In particular, each NCB

shall purchase eligible securities of issuers of its own jurisdiction. Securities

issued by eligible international organisations and multilateral development

banks may be purchased by all NCBs. The ECB shall purchase securities

issued by central governments and recognised agencies of all jurisdictions.

Article 7


18

Eligible counterparties

The following shall be eligible counterparties for the PSPP:

(a) entities that fulfil the eligibility criteria to participate in Eurosystem

monetary policy operations pursuant to Section 2.1 of Annex I to Guideline

ECB/2011/14; and

(b) any other counterparties that are used by Eurosystem central banks for

the investment of their euro-denominated investment portfolios. [Or. 22]

Article 8

Transparency

1. The Eurosystem shall publish on a weekly basis the aggregate book

value of the securities held under the PSPP in the commentary of its

consolidated weekly financial statement.

2. The Eurosystem shall publish on a monthly basis the weighted average

residual maturity by issuer residence, separating international organisations

and multilateral development banks from other issuers, of its PSPP holdings.

3. The book value of securities held under the PSPP shall be published on

the ECB’s website under the open market operations section on a weekly

basis.

Article 9

Securities lending

The Eurosystem shall make securities purchased under PSPP available for

lending, including repos, with a view to ensuring the effectiveness of the

PSPP.

Article 10

Final provision

This Decision shall enter into force on the day following its publication on

the ECB’s website. It shall apply from 9 March 2015.

12 The PSPP Decision has been amended several times: by Decision (EU) 2015/2101

of the European Central Bank of 5 November 2015 amending Decision (EU)

2015/774 on a secondary markets public sector asset purchase programme

(ECB/2015/33), OJ L 303 of 20 November 2015, p. 106 (“the Decision of 5

November 2015”), the limit up to which a particular security could be purchased

was increased from 25% to 33%, and by the Decision of 18 April 2016 further

terms were amended that concerned, in particular, bonds of international

WEISS AND OTHERS

19

institutions. By Decision (EU) 2016/1041 of the European Central Bank of 22

June 2016 on the eligibility of marketable debt instruments issued or fully

guaranteed by the Hellenic Republic and repealing Decision (EU) 2015/300

(ECB/2016/18) (‘the Decision of 22 June 2016’) particular rules were adopted for

the purchase of debt securities of the Hellenic Republic (cf. ECB, Press Release of

8 December 2016). [Or. 23]

(a) Aim of the PSPP

13 According to the ECB, the overriding aim of the PSPP is to increase inflation to

just below 2%. It brings about a further easing of the monetary and financial

conditions (including the financing conditions for firms and private households).

As a result it promotes consumption and investment. The intended transmission of

the monetary policy effects of the programme to the real economy is described as

follows (recital 4 of the Decision of 4 March 2015):

Thanks to its portfolio re-balancing effect, the sizable purchase volume of

the PSPP will contribute to achieving the underlying monetary policy

objective of inducing financial intermediaries to increase their provision of

liquidity to the interbank market and credit to the euro area economy.

b) Conditions for the purchase of securities under the PSPP

14 Article 3(1) of the Decision of 4 March 2015 sets out eligibility criteria for the

purchase of marketable debt securities under the PSPP. Accordingly, euro-

denominated marketable debt securities issued by central governments of a

Member State whose currency is the euro, recognised agencies located in the euro

area, international organisations located in the euro area and multilateral

development banks located in the euro area are eligible. Since April 2016

securities issued by regional or local governments may also be purchased. Under

Article 3(4) of the Decision of 4 March 2015, subject to certain conditions,

purchases from non-financial corporations also may be envisaged. The concepts

of ‘recognised agency’ ‘international organisation’ and ‘multilateral development

bank’ mean, according to Article 2(2) to (4) of the Decision of 4 March 2015

entities that the Eurosystem has classified as such for the purpose of the PSPP.

These are the following international and supranational institutions that are

published on the ECB’s website: The European Union itself, the European Atomic

Energy Community, the European Stability Mechanism (ESM), the European

Financial Stability Facility (EFSF), the European Investment Bank, the Council of

Europe Development Bank and the Nordic Investment Bank. In addition

‘recognised agencies’ include also national institutions which, as far as may be

seen, are owned by the State or in which the State has a holding, but whose legal

structures are heterogeneous (e.g. Kreditanstalt für Wiederaufbau,

Landeskreditbank Baden-Württemberg — Förderbank [„L-Bank“], BPIFrance

Financement SA, [Or. 24] Institute de Credito Oficial, ÖBB-Infrastruktur AG,

Housing Finance Agency pic, Cassa del Trentino S.p.A.).


20

15 Alongside the applicable general requirements for monetary policy operations in

accordance with Guideline ECB/2011/14, issuers must have a credit quality

assessment of at least Credit Quality Step 3 (i. e. BBB- or Baa3) (Article 3(2) of

the Decision of 4 March 2015). At its Press Conference of 8 December 2016, the

ECB announced (cf. ECB, Introductory statement to the press conference of 8

December 2016,

https://www.ecb.europa.eu/press/pressconf/2016/html/is161208.en.html) that on 1

January 2017 the minimum remaining maturity for eligible securities would be

reduced from two years to one year in order to broaden the range of eligible

securities. Moreover, from that date, in derogation from Article 3(5) of the

Decision of 4 March 2015, purchases of securities with a yield to maturity below

the interest rate on the ECB’s deposit facility would be permitted to the extent

necessary (since 16 March 2016 –0.4%, see

http://www.ecb.europa.eu/stats/policy_and_exchange_rates/key_ecb_interest_rate

s/html/index.en.html). This was said to be merely an option, intended to ensure the

smooth implementation of the Programme; the Governing Council was acting in a

pragmatic and flexible way.

16 Marketable debt securities of States under a financial assistance programme may

be purchased even if the securities are assessed at a credit quality below Credit

Quality Step 3, provided that the application of the Eurosystem’s credit quality

threshold has been suspended by the ECB Council pursuant to Article 8 of

Guideline ECB/2014/31 (Article 3(2)(c) of the Decision of 4 March 2015). This

also happened as a result of Article 1(2) of Decision (EU) 2016/1041 of the ECB

of 22 June 2016, after the ESM decided upon the disbursement of further financial

assistance. The ECB Council has reserved the decision on whether Greek

securities will be purchased under the PSPP (see Article 3 of the Decision of 22

June 2016).

17 Purchases of newly issued or tapped security and debt instruments with a

remaining maturity that are close in time, before and after, to the maturity of the

marketable debt instruments to be issued are permissible only over a period to be

determined by the ECB Council (‘blackout period’). This is intended to permit the

formation of a market price. (Article 4(1) of the Decision of 4 March 2015). The

blackout period is not published on the ground that publication would endanger its

aim. The Eurosystem accepts the same treatment (pari passu) as private investors

(recital 8 of the Decision of 4 March 2015).

(c) Implementation of the PSPP

18 The purchases began on 9 March 2015. They were made and are made only on the

secondary market (Article 1 of the Decision of 4 March 2015) and were and are

implemented by the ECB and the national central banks. Of the total value of all

securities purchased under the PSPP, up to April 2016 the ECB purchased 8%,

and the national central banks 92%; since April 2016 the ECB is to purchase 10%,

and the remaining 90% is to be purchased by the national central banks (see

Article 6(2), first sentence, of the Decision of 4 March 2015, change in the

WEISS AND OTHERS

21

percentages introduced by Article 1(4) of the Decision of 18 April 2016). The

distribution of the 90% purchased by national central banks across the individual

national central banks is to be according to the key for subscription of the ECB’s

capital as referred to in Article 29 of the Statute of the ESCB (ESCB Statute)

(Article 6(2), second sentence, of the Decision of 4 March 2015).

19 Each national central bank is to purchase eligible securities of issuers of its own

jurisdiction (Article 6(3), third sentence, of the Decision of 4 March 2015). To

date, so far as may be seen, this is understood generally to mean “exclusively” of

issuers in its own jurisdiction. In line with that, the Deutsche Bundesbank

announced in respect of the year 2015 that under the PSPP it had purchased

exclusively bonds of German issuers (of the State and State entities, i.e.

“recognised agencies, see above). It is not known whether and how bonds of

international issuers are distributed amongst individual Member States.

20 Within the PSPP it is intended that overall 10% (before April 2016: 12%) of debt

instruments of international organisations and multilateral development banks and

90% (before April 2016:88%) of those of central governments and “recognised

agencies” be purchased.

21 The ECB purchases debt instruments of central governments and recognised

agencies of all jurisdictions (thus not of international organisations and

multilateral development banks, see Article 6(3), fifth sentence, of the Decision of

4 March 2015). National central banks purchase only government bonds of their

own central governments (see above) and issues of “recognised agencies” (thus

[Or. 26] in particular of public sector investment banks) of their own jurisdiction

(see Article 6(3), third sentence, of the Decision of 4 March 2015), and, without

restriction, securities issued by international organisations and multilateral

development banks (see Article 6(2) and (3), fourth sentence, of the Decision of 4

March 2015).

22 Initially an upper limit of 25% applied per International Securities Identification

Number (ISIN) (see Article 5(1) of the Decision of 4 March 2015). As a result of

Article 1 of the Decision of 5 November 2015, this limit was increased to 33% for

all marketable debt securities with effect from 10 November 2015, provided that

this would not lead to the national central banks reaching blocking minority

holdings in orderly debt restructurings. On the basis of the Decision of 18 April

2016, for securities of international organisations there is now an upper purchase

limit of 50% (in connection with this, the overall share of such securities was

reduced from 12% to 10% and the share of the ECB in the PSPP was increased

from 8% to 10%, see paragraph 18 above).

23 As a result of the allocation of purchases to the ECB, on the one hand, and the

national central banks, on the other, there is, according to the ECB, a “principle of

risk sharing” (cf. ECB, Press Release of 10 March 2016) for hypothetical losses

under the PSPP. This risk sharing would cover 20% of purchases under the PSPP,

in respect of which losses would therefore be shared (see ECB, Press Release of


22

22 January 2015). The rules for the bearing of risks thus indicated are not,

however, set out in any published decision, in particular not in the Decision of 4

March 2015 on the introduction of the PSPP. On the basis of press releases

concerning unpublished decisions it is, however, apparent that the purchases in

respect of which joint bearing of losses exists are made up of the 10% purchased

by the ECB and the 10% of instruments of European and international institutions

that are purchased by all national central banks (see Deutsche Bundesbank,

Monthly Report, June 2016, p. 32, footnote 4). On the other hand, each national

central bank bears the risk of non-repayment of the government bonds that it

purchases or has purchased from its own central government or equivalent issuers.

[Or. 27]

II. History of the proceedings

1. Submissions of the complainants

24 The complainants submit — with different areas of emphasis — that the PSPP

infringes the prohibition of monetary financing of budgets under Article 123(1)

TFEU (a), the allocation of competences between the European Union and the

Member States established in Article 119 et seq. TFEU (b), and the constitutional

identity (Verfassungsidentität) of the Grundgesetz (Basic Law, GG) that is

protected by Article 4(2) TEU and Article 79(3) GG (c).

25 (a) The PSPP circumvents the prohibition in Article 123(1) TFEU in that the

national central banks purchased government bonds from commercial banks

which the latter had purchased from the Member States. It can make no difference

whether central banks purchased the bonds on the primary market or via

commercial banks of their own Member State on the secondary market. Thus the

purchase of securities under the PSPP appears to be a direct purchase not only

from an economic point of view. Also from a legal point of view, there is a

prohibited direct purchase. The concept of direct purchase is legally defined with

binding effect in Article 2 of Regulation (EC) No 3603/93. It provides that only

the cases of the purchase of government bonds mentioned there are not considered

to be prohibited direct purchases. The purchases in question here do not fall

thereunder.

26 The criteria laid down by the Court of Justice under which a purchase of bonds on

the secondary market does not constitute a circumvention of the prohibition of

direct purchases (cf. CJEU, judgment of 16 June 2015, Gauweiler, C-62/14,

EU:C:2015:400) are not fulfilled. Thus the decision to make purchases and the

volume of the planned purchases should not be announced beforehand. However,

this is precisely what has happened as a result of the ECB’s detailed statements.

On the basis of the magnitude of the PSPP and the capital key of each national

central bank, the States could calculate in advance how many bonds would be

purchased. On account of the considerable magnitude of the programme, States

with excessive debts could count on the fact that bonds issued by them would be

WEISS AND OTHERS

23

purchased by the commercial banks. There is certainty on the market as to what

specific amount, on what timescale, and according to which allocation key, the

Eurosystem will purchase government bonds each month. A real market price

cannot be formed in this way. [Or. 28]

27 The observance of a blackout period after a bond issue does not alter the situation.

The observance of a blackout period follows from the very notion of the

secondary market and does not yet guarantee that when the PSPP is implemented

a real market price will be formed. As the PSPP is primarily directed at

government bonds, the Eurosystem, through their purchase of them, reduces the

interest rate level for government bonds, the interest rate for which falls, rather

than the general interest rate level, that is, the price of borrowing for market

participants in general. This finances the States in the Euro area. This intervention

has the same effect as a purchase on the primary market and circumvents the

prohibition of direct purchase, despite the intermediation of the first purchaser. By

encouraging Member States of the euro area to issue new bonds, the PSPP has the

same effect as a loan from a central bank. From an economic perspective, it is, in

these circumstances, irrelevant whether the Eurosytem purchases the government

bonds on the primary or on the secondary markets.

28 Further important indicia — for example the offsetting of the ESM Assistance

Programme, the reallocation and neutralisation of risk premiums on the capital

market, the purchase of government bonds of low credit-worthiness and the

associated assumption of the risk of default, the “final storage” of debt securities

on the balance sheets of the Eurosystem, the acceptance of negative returns and

the waiver of the status as a privileged creditor — also indicate that the PSPP

infringes the prohibition of monetary financing. An indication of the financing of

States is in particular the holding of bonds until their maturity. This removes the

government bonds in question from the market at least for the duration of the

programme. The programme thereby influences the price development of other

bonds of these issuers and makes it easier for them to finance their budgets. The

scarcity of supply keeps the interest rate low and ensures that the States, even with

high indebtedness, enjoy more favourable financing conditions than the market

would otherwise offer them. That creates precisely the incentive effect which also

the Court of Justice regards as a circumvention of the prohibition of the monetary

financing of budgets. That this is the case is proved by the actual direction of

interest rates for certain government bonds.

29 Moreover, there is an infringement of the prohibition of monetary financing of

budgets in the fact that under the PSPP debt instruments of European and

international debt institutions were also purchased. Thereby the European Union,

the ESM and the EFSF obtained access to central bank money via the secondary

market. This is contrary to the aim of Article 123(1) TFEU, which is to reserve to

the Member States the control over the financial means of the European Union.

The Bundesverfassungsgericht has already held that the ESM’s deposit with the

ECB of government bonds as security for loans infringes the prohibition of the

direct purchase of government bonds (referring to BVerfGE 132, 195 <268 para.


24

174>). This must be the case, a fortiori, for the purchase and holding of ESM

bonds by the Eurosystem. In both cases the central bank money serves to finance

stabilisation assistance to States subject to the assistance programme. If the ESM,

EFSF or the European Investment Bank were to purchase government bonds on

the primary market, which they passed on to the ECB after a blackout period, the

prohibition of purchasing government bonds on the primary market would be

circumvented.

30 (b) The PSPP is not covered by the Eurosystem’s mandate and is an obvious

and structurally significant exceeding of powers. It is true that purchases of

government bonds are part of the Eurosystem’s monetary policy repertoire. In the

present form, such purchases are, however, not permissible. Apart from the fact

that inflation of just below 2% does not signify price stability, the PSPP is also

disproportionate. It is neither appropriate nor necessary to achieve that aim. In

view of its volume, the potential benefit is out of proportion to the risks,

disadvantages and costs (overwhelming money supply; no experience with ending

it; acceptance of enormous default risks in the balance sheets of the central banks;

dependence of the Eurosystem on politics; strong incentive for States with

excessive debts to refrain from structural reforms; reallocation effects; devaluation

of savings and security for old age; risk of price bubbles). According to its

objective effects, the PSPP is an instrument to save and promote banks. The latter

can unload “toxic” instruments on the Eurosystem and thereby cleanse their

balance sheets. Banks are thereby protected from the risks of loss and insolvency.

That is economic policy which is not within the competence of the ECB.

31 (c) The PSPP also infringes the principle of democracy that informs

constitutional identity. It establishes a solidarity mechanism of sharing risks and

liability between the Member States of the Eurosystem. The budgets of the

Member States must answer for reduced earnings and losses that result from it. In

that way future budgetary burdens arise which the national Parliaments can

neither estimate nor influence, which is why they are no longer masters of their

decisions. This applies already to the current form of the programme [Or. 30]

under which, according to the ECB, there is a risk sharing for only 20% of the

purchase volume. There is however also a danger that the ECB Council will

extend joint liability on the basis of Article 32.4 of the ECB Statute so as to

extend to a full sharing of risks. In that regard, the national budgetary legislator

has neither a right of codetermination nor a veto.

2. Submissions of the ECB and the Deutsche Bundesbank

(a) Submissions of the ECB

32 The ECB submits that the EAPP in general and the PSPP in particular are covered

by its mandate and do not infringe the prohibition of monetary financing of

budgets.

WEISS AND OTHERS

25

33 The ECB has made no announcement to the effect that it intends to hold

purchased assets until their maturity. Purchased assets may be sold at any time.

Nor can it be inferred from the fact that some assets purchased under the PSPP

have already reached maturity that there is a legal obligation to hold all remaining

and future assets also until the date of their maturity.

34 Referring to Article 4(1) of the Decision of 4 March 2015, it states moreover that,

under the PSPP, purchases of newly issued or tapped securities and marketable

debt instruments with a remaining maturity that are close in time, before and after,

to the maturity of the marketable debt instruments to be issued, are permissible

only after the expiry of a period to be determined by the ECB Council (‘blackout

period’). The precise duration of the blackout period is laid down in non-public

ECB guidelines. Its publication would run counter to the aim of the blackout

period, which is to enable the formation of a market price.

35 The Eurosystem ensures market neutrality in that the PSPP provides for upper

limits for purchases of public sector securities, per issue and issuer. As there is no

legal obligation of the central banks of the Eurosystem to purchase government

bonds with a particular ISIN, there is no certainty that the assets to be purchased

will actually be purchased after their issue. The market price of PSPP-eligible

securities of the [Or. 31] public sector is determined both on the primary market

and on the secondary market for each maturity period by several factors, including

macroeconomic developments, changing demand from various groups of

investors, current and expected ECB key lending rates and expected purchases by

the central banks of the Eurosystem. When purchasing PSPP-eligible securities,

the ECB does not aim at a particular credit risk. It is not a price setter, but a price

taker.

36 The EAPP does not aim to harmonise yields of various issuers, but has clearly

lowered yields over a broad spectrum of finance market segments. There are no

indications that yields upon issue relative to secondary market yields had fallen in

comparison to their normal pattern. The PSPP has not led to distortions in that

regard. The spreads, that is the difference between the yields of securities of

various issuers, continue to react to macroeconomic and other relevant

developments. The EAPP has nevertheless contributed to a compression in the

spreads.

37 The PSPP fulfils the requirements which the Court of Justice formulated in the

light of the circumvention prohibition contained in Article 123(1) TFEU in order

to ensure that purchases on the secondary market do not have the same effect as a

purchase on the primary market. In the present case, purchases were made

exclusively on the secondary market; the ECB Council is responsible for deciding

on volume, start, continuation and suspension of the purchases. A blackout period

applies, the duration and magnitude of the programme are limited and occur until

the inflation aim is achieved; there are also upper limits on purchases. In addition

non-public safeguards exist.


26

38 In any case, issuers have no certainty that new issues will be purchased by the

Eurosystem up to the upper limit, because the latter does not purchase directly

from the issuers. But neither can market participants predict whether a particular

debt instrument will be purchased under the PSPP. The Eurosystem is at liberty to

purchase new issues or instruments that have been on the market for a longer

period. Moreover, in many States, several issuers fulfilled the admissibility

criteria. The Eurosystem publishes the PSPP holding only in aggregate form, not

at the level of individual issuers or debt instruments. Nor is the degree of

utilisation of the upper limits published. Estimates by [Or. 32] market participants

are highly inaccurate; only a few business partners gain any knowledge at all of

the Eurosystem’s interest in purchasing.

39 A lengthening of the term of government bonds has been observable already for

some years and not just since the announcement of the PSPP. Since the

announcement, the volume of issues has fallen slightly. This development is not

restricted to the euro area, but may be seen in other major economies. It is,

however, not to be ruled out that the low interest rate might be regarded as an

opportunity for particularly advantageous financing.

(b) Submissions of the Deutsche Bundesbank

40 The Deutsche Bundesbank submits that the EAPP aims to provide an additional

broad monetary-policy impulse, after the leeway of traditional, monetary-policy

instruments has already very largely been used. According to the Decisions of the

ECB Council, this impulse should be given by means of monthly purchases until

the ECB Council can see a development that is in line with achieving medium-

term inflation rates that are below but close to the rate of 2%. By means of the

purchase of bonds with a longer term, the aim is also to reduce longer term market

interest rates further throughout the euro area and thus, inter alia, to stimulate

lending and economic activity generally, in order ultimately to achieve a more

rapid increase in prices that is consistent with the aim of stability. The aim of the

programme is not, on the other hand, to influence premiums that reflect the risk

associated with a debt instrument or an issuer.

41 It is particularly important to structure programmes in such a way that the danger

of monetary financing of budgets and of the allocation of State insolvency risks

between the Member States is avoided as far as possible. The measures should not

primarily have economic- and finance-policy effects, but the monetary-policy

effect should clearly dominate. Lastly, they should not materially restrict the

smoothest possible functioning of the relevant financial markets. In that regard,

the Deutsche Bundesbank emphasises, first, the minimum requirements set for the

credit quality of the debt instruments to be purchased and points to the upper

limits, per issue and issuer, for bond purchases and to the possibility of reselling

government bonds also before their maturity. Moreover, [Or. 33] there are

additional restrictions under the PSPP which are intended, as a whole, to take

account of the particular problem of the purchase of bonds by a central bank of a

monetary union, such as purchasing by the central bank of the Member State

WEISS AND OTHERS

27

principally at its own risk and refraining from targeted purchases of bonds of

individual Member States but rather of a broad, comprehensible and, in a certain

sense, representative basket.

42 Even with these features, however, extensive and long-lasting bond purchases are

likely to have a series of undesired side effects that increase with time and

volume. These include the blurring of the lines between monetary and fiscal

policy, increased risks for stability on the finance markets and negative effects on

the capital markets. This is an important reason why broad-based bond purchases,

as through the EAPP, should be used only in exceptional monetary-policy

circumstances and then be terminated again as quickly as possible.

III. Relevant legal provisions and case-law

1. Legislation

43 The relevant articles of the Basic Law for the Federal Republic of Germany of 23

May 1949 ... [as amended] read as follows:

Article 20

(1) The Federal Republic of Germany is a democratic and social federal

State.

(2) All State authority is derived from the people. It shall be exercised by

the people through elections and other votes and through specific legislative,

executive and judicial bodies.

(3) The legislature shall be bound by the constitutional order, the

executive and the judiciary by law and justice.

(4) (…)

Article 23

(1) With a view to establishing a united Europe, the Federal Republic of

Germany shall participate in the development of the European Union that

[Or. 34] is committed to democratic, social and federal principles, to the

rule of law, and to the principle of subsidiarity, and that guarantees a level of

protection of basic rights essentially comparable to that afforded by this

Basic Law. To this end the Federation may transfer sovereign powers by a

law with the consent of the Bundesrat. The establishment of the European

Union, as well as changes in its treaty foundations and comparable

regulations that amend or supplement this Basic Law or make such

amendments or supplements possible, shall be subject to Article 79(2) and

(3).

(1a) to (7) (…)


28

Article 38

(1) Members of the German Bundestag shall be elected in general, direct,

free, equal and secret elections. ...

(2) and (3) (…)

Article 79

(1) This Basic Law may be amended only by a law expressly amending or

supplementing its text. (…).

(2) Any such law shall be carried by two thirds of the Members of the

Bundestag and two thirds of the votes of the Bundesrat.

(3) Amendments to this Basic Law affecting the division of the Federation

into Länder, their participation on principle in the legislative process, or the

principles laid down in Articles 1 and 20 shall be inadmissible.

Article 88

The Federation shall establish a note-issuing and currency bank as the

Federal Bank. Within the framework of the European Union, its

responsibilities and powers may be transferred to the European Central

Bank, which is independent and committed to the overriding goal of

assuring price stability.

2. Case-law of the Bundesverfassungsgericht

44 Article 38(1), first sentence, GG guarantees German citizens, to the extent

protected by Article 79(3) GG, a right, similar to a fundamental right, to

democratic self-determination, which is enforceable by means of a constitutional

complaint (a). The German constitutional institutions are under a duty, on the

basis of their responsibility for integration, to work towards compliance with the

integration programme within the framework of their competences (b). The

Bundesverfassungsgericht is to ensure, by means of an ultra vires review and a

review of constitutional identity (Identitätskontrolle), that this responsibility is

observed (c). With regard to the tasks and powers of the ECB, both possibilities of

review may be significant (d). [Or. 35]

45 (a) In its settled case-law, the Bundesverfassungsgericht interprets the

abovementioned provisions as imposing limits on the Federal Republic of

Germany, compliance with which is to be reviewed by the

Bundesverfassungsgericht, including upon complaints lodged by individual

citizens. According to the case-law established by the Maastricht judgment in

1993, the individual’s right to vote under Article 38(1), first sentence, GG covers,

together with the formal legitimisation of the (Federal) public authority, also its

WEISS AND OTHERS

29

fundamental democratic content, which guarantees in particular the citizen’s right

to participate in the democratic formation of opinions through participation in

elections of the Federal Parliament, and also prohibits a hollowing out of that

right. [...]

46 The citizen’s right to democratic self-determination enshrined in Article 38(1),

first sentence, GG [...] is however strictly limited to the core of the democratic

principle rooted in human dignity (Article 1, in conjunction with Article 79(3),

GG). Article 38(1), first sentence, GG confers no right to a review of the legality

of majority democratic decisions that goes beyond this guarantee. It does not serve

to review the content of democratic procedures, but is aimed at making them

possible [...]. As a right, equivalent to a fundamental right, to participate in the

democratic self-dominion of the people, Article 38(1), first sentence, GG,

therefore in principle confers no power to bring a complaint against parliamentary

decisions, in particular decisions on legislation. [...]. The scope of its guarantee is

limited to structural changes in the structure of the State’s organisation, as may

occur, for example, in the case of the transfer of sovereign powers to the European

Union or other supranational bodies [...].

47 (b) The Member States and their constitutional institutions bear — together

with the institutions of the European Union — responsibility for compliance with

the integration programme (responsibility for integration [...]).

48 (aa) The safeguarding of responsibility for integration is also served inter alia

by the special reservation in Article 23(1), second sentence, GG under which

sovereign powers may be transferred only by a law with the consent of the

Bundesrat (Federal Council) [Or. 36] [...]. Nor does the Basic Law empower the

German State institutions to transfer sovereign rights in such a way that as a result

of their exercise, independently, further competences of the European Union could

be established. It forbids the transfer of competence to decide on the exercise of

competence (Kompetenz- Kompetenz) [...]. For this reason, the Parliament may not

renounce the power to decide whether and to what extent sovereign rights should

be transferred, or leave it to institutions of the European Union to decide. On the

contrary, it is obliged to decide itself, in a formal procedure on the transfer of

competences in the framework of European integration, so that the constitutional

law principle of the limited conferral of powers cannot be undermined [...].

49 (bb) As a result of responsibility for integration, the Federal Parliament and the

Federal Government have a duty to supervise compliance with the integration

programme and to work actively towards it. In so doing they are in principle

obliged, within their respective areas of competence, to take legal or political steps

for the annulment of measures that are not covered by the integration programme,

and — whilst the measures produce their effects — to adopt appropriate

arrangements so that the domestic effects of the measures are limited as far as

possible [...].


30

50 (cc) A breach of these duties of the Federal Parliament and the Federal

Government resulting from their responsibility for integration infringes personal

rights of the electorate, which are capable of being the subject of a constitutional

complaint. A citizen who is entitled to vote has in principle a right under Article

38(1), first sentence, GG that, in order to secure the democratic possibility of

influencing the process of European integration, a transfer of sovereign powers

should take place only in the forms provided for it under Article 23(1), second and

third sentences, Article 79(2) GG. The democratic decision-making process which

these rules ensure, together with the required certainty of the transfer of sovereign

rights, is undermined by the assumption of competences by institutions, bodies,

offices and agencies of the European Union. A citizen may therefore demand that

the Federal Parliament and the Federal Government actively deal with the

question of how the allocation of competence may be restored, and bring about a

positive decision as to the paths to be taken for that purpose. [Or. 37] [...].

51 (c) It is the task of the Bundesverfassungsgericht to examine whether institutions,

bodies, offices and agencies of the European Union have manifestly exceeded

their competences when adopting measures (aa) or those measures affect the non-

transferable area of constitutional identity (bb), with the consequence that German

State institutions may not cooperate in their coming into being or their

transposition (cc).

52 (aa) Measures of institutions, bodies, offices and agencies of the European

Union that are issued ultra vires infringe the integration programme laid down in

the Zustimmungsgesetz (Law granting consent) in accordance with Article 23(1),

second sentence, GG. An ultra vires review serves the purpose of preventing such

infringements. The Bundesverfassungsgericht thereby examines whether a

measure of institutions, bodies, offices and agencies of the European Union

exceeds the integration programme in a sufficiently serious manner and therefore

the democratic legitimacy for it is lacking in Germany. It also serves to guarantee

the principle of the rule of law [...].

53 The outlines of the requirements for an ultra vires review were set out in the 2010

Decision in Honeywell [...] and in the OMT judgment of 21 June 2016. It is stated

there:

(…)

bb) Due to the strict substantive limitation on the “right to democracy”

enshrined in Article 38(1), first sentence, in conjunction with Article 20(1)

and (2) and Article 79(3) GG, such a review may be conducted only in cases

in which competences were exceeded in a sufficiently serious manner. (…).

(1) Finding an act to be ultra vires requires – irrespective of the subject

matter concerned – that the institutions, bodies, offices, and agencies of the

European Union manifestly exceed their transferred competences. (…).

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31

This is the case if – when applying common methodological standards (....) –

the competence cannot be justified under any legal standpoint (…). This

interpretation of “manifest” follows from the necessity of exercising

restraint when performing the ultra vires review (...). With regard to the

Court of Justice of the European Union, it also follows from the different

nature of the tasks and standards that the Bundesverfassungsgericht on the

one hand and the Court of Justice of the European Union on the other must

fulfil and apply. (…). This leeway, which is necessarily linked to the tasks

assigned to Court of Justice under Article 19(1), second sentence, TEU,

reaches its limit [Or. 38] only when an interpretation of the Treaties is

manifestly utterly incomprehensible and thus objectively arbitrary. Only if

the Court of Justice were to cross that line, would its actions no longer be

covered by Article 19(1), second sentence, TEU and its decision would lack

the minimum of democratic legitimation necessary for Germany under

Article 23(1), second sentence, in conjunction with Article 20(1) and (2) and

Article 79(3) GG.

However, finding that competences have been exceeded in a manifest way

does not require there to be no differing legal views on that issue. (…).

(2) A structurally significant shift of competences to the detriment of the

Member States (…) can only be found to be present if the exceeding of

competences carries considerable weight for the principle of democracy and

the sovereignty of the people. This is for instance the case if it is capable of

altering the fundamental competences of the European Union (…) and

thereby of undermining the principle of conferral. Such a case can be

assumed if the exercise of the competence by the institution, body, office, or

agency of the European Union were to require a treaty amendment in

accordance with Article 48 TEU or making use of an evolutionary clause

(Evolutivklausel) (…), and thus, in Germany, action on the part of the

legislature – be it in accordance with Article 23(1), second sentence, GG, or

in accordance with the Integrationsverantwortungsgesetz (Law regarding

responsibility for European integration) (BVerfGE 142, 123 <199 f. paras.

144 ff.>).

54 (bb) In the course of the identity review the Bundesverfassungsgericht

examines whether principles declared inviolable by Article 79(3) GG are affected

by the transfer of sovereign powers by the German legislature or by a measure of

institutions, bodies, offices and agencies of the European [...]. In so far as relevant

here, an identity review may relate in particular to the safeguarding of the overall

responsibility of the German Bundestag for budgetary policy [...].

55 In the OMT judgment of 21 June 2016 it is stated further in that regard:

The identity review not only ensures that the European Union is not

attributed sovereign powers outside the areas open to transfers but it also

prevents the implementation of measures of institutions, bodies, offices, and


32

agencies of the European Union that have a comparable effect and at least de

facto amount to a transfer of power in violation of the Basic Law. (…). [Or.

39]

(…) As the Senate explained in detail in its Order of 15 December 2015

[…], the identity review does not violate the principle of sincere cooperation

within the meaning of Article 4(3)TEU. On the contrary, Article 4(2), first

sentence, TEU essentially provides for identity review (on taking into

consideration national identity see also ECJ, judgment of 2 July 1996,

Commission v Luxembourg, C-473/93, ECR 1996, I-3207, para. 35;

judgment of 14 October 2004, Omega, C-36/02, ECR 2004, I-9609, paras.

31 et seq.; judgment of 12 June 2014, Digibet and Albers, C-156/13,

EU:C:2014:1756, para. 34) and therefore it also conforms to the institutional

situation of the European Union. The European Union is an association of

sovereign States, of constitutions, administrations, and judiciaries founded

upon international treaties concluded between the Member States. As

masters of the Treaties, the Member States, by ordering the applicability of

European law at the national level, decide whether and to what extent Union

law may claim applicability and precedence within the respective Member

State. (…) (BVerfGE 142, 123 <195 f. Rn. 139 f.>).

56 The Senate has set out the outlines of an identity review to safeguard the overall

responsibility of the German Bundestag for budgetary policy in more detail in its

case-law on the ESM:

There is a violation of Article 38 (1) of the Basic Law in particular if the

German Bundestag relinquishes its parliamentary budget responsibility with

the effect that it or a future Bundestag can no longer exercise the right to

decide on the budget on its own responsibility (…). The decision on public

revenue and public expenditure is a fundamental part of the ability of a

constitutional state to democratically shape itself (…). The German

Bundestag must therefore make decisions on revenue and expenditure with

responsibility to the people. In this connection, the right to decide on the

budget is a central element of the democratic development of informed

opinion (…).

A necessary condition for the safeguarding of political latitude in the sense

of the core of identity of the constitution (Article 20(1) and (2), Article 79(3)

of the Basic Law) is that the budget legislature makes its decisions on

revenue and expenditure free of third party directions on the part of the

institutions and other Member States of the European Union and remains

permanently “the master of its decisions” (…). It follows from the

democratic basis of budget autonomy (…) that the Bundestag may not

consent to an inter-governmentally or supranationally agreed automatic

guarantee or performance which is not subject to strict requirements and

whose effects are not limited, which – once it has been set in motion – is

removed from the Bundestag’s control and influence (…).

WEISS AND OTHERS

33

Moreover, no permanent mechanisms may be created under international

treaties which are tantamount to accepting liability for decisions made by the

free will of other States, above all if they entail consequences which are hard

to calculate. The Bundestag must individually approve every large-scale

federal aid measure on the international or European Union level that is

made in solidarity and results in expenditure. [Or. 40] (BVerfGE 132, 195

<239 ff. Rn. 106 ff>[...]).

57 (cc) Ultra vires measures and impairments of constitutional identity protected

by Article 79(3) GG are unaffected by the precedence of EU law. As they are

inapplicable in Germany, they have no legal effects on German State institutions.

German constitutional institutions, authorities and courts may not cooperate either

in their coming into being, or in their transposition, performance or operation. [...].

58 Therefore, it does not contradict the principle of the Basic Law’s openness to

European integration (Preamble, Article 23(1), first sentence, GG) if the

Bundesverfassungsgericht – by way of exception and under strict circumstances –

declares measures of an institution, body, office, or agency of the European Union

to be inapplicable in Germany by way of exception. [...]. A substantial risk to the

uniform application of EU law does not arise as a result, in particular as the

review powers reserved to the Bundesverfassungsgericht are to be exercised with

restraint and openness to EU law [...]. In so far as necessary, it bases its review on

the interpretation of that measure given by the Court of Justice in a reference for a

preliminary ruling under Article 267(3) TFEU [...] and at the same time gives the

Court of Justice the possibility of examining whether a measure of secondary law

has a sufficient legal basis of competence or otherwise infringes higher-ranking

EU law. The duty to make a preliminary reference applies not only in the course

of an ultra vires review, but also before a finding of the inapplicability in

Germany of a measure of institutions, bodies, offices and agencies of the

European Union on account of an effect on the constitutional identity protected by

Article 79(3) in conjunction with Article 20 GG [...].

59 d) The possibilities for the Bundestag, and thus voters, to influence the

observance of sovereign rights by European institutions are however almost

entirely revoked inasmuch as the ECB is given independence in relation to the

European Union and the Member States (Article 130 [Or. 41] TFEU). This

restriction of the democratic legitimacy given by voters in the Member States has

an impact on the principle of democracy, but is compatible with Article 79(3) GG

as a modification provided for in Article 88, second sentence, GG. The

amendment of Article 88 GG made with a view to the European Union permits a

transfer of powers of the Deutsche Bundesbank to the ECB, if this is in

accordance with the strict criteria of the Maastricht Treaty and the Statute of the

ESCB with regard to the independence of the central bank and the priority of

monetary stability. These reductions in influence in the service of securing trust in

repayment in a currency are justifiable because it takes account of the

particularity — tested in the German legal system and, scientifically, proven —

that an independent central bank is better able to secure the value of money and


34

thus the general economic foundation for the State’s budget policy and for private

planning and expenditure when exercising economic rights than sovereign

institutions whose possibilities for action and means of action largely depend on

the money supply and value of money and are dependent on short term consent of

political forces. To that extent the independence of monetary policy within the

sovereign competence of the independent ECB, which cannot be transferred to

other policy areas, satisfies the constitutional requirements. [...].

60 In its reference for a preliminary ruling in the OMT case of 14 January 2014, the

Senate regarded a narrow interpretation of Article 119 and Article 127 et seq.

TFEU to be necessary, having regard to the basis under constitutional law for

Germany’s membership of the currency union and the transfer of competences to

the ECB, and it gave the following reasons:

The allocation of powers between the European Union and the Member

States is governed by the principle of conferral (Article 5(1) and (2) TEU).

This also applies to functions and powers assigned by the Treaties to the

European System of Central Banks, which consists of the European Central

Bank and the national central banks (first sentence of Article 282(1) TFEU).

In order to satisfy democratic standards, this mandate must be strictly

limited (…). Compliance with its limits is fully subject to judicial review;

such review falls, first and foremost, within the responsibility of the Court of

Justice of the European Union, which is required to ensure that the law is

observed in the interpretation and application of the Treaties (Article 19(1)

TEU) (…).

(…)The independence enjoyed by the European Central Bank and the

national central banks in the exercise of the powers conferred upon them

(Article 130, third and fourth sentences of Article 282(3) TFEU) diverges

from the requirements under the Basic Law for the democratic legitimation

of political decisions. With regard to Germany, the Bundesvefassungsgericht

has expressly held that the restriction of the democratic legitimation

emanating from voters in the Member States as a result of the transfer of

monetary policy powers to an independent European Central Bank affects

the principle of democracy. That restriction is nevertheless compatible with

democratic principles because it takes account of the established and

scientifically proven particular factor of monetary policy, namely that an

independent central bank is more likely to safeguard monetary value and

therefore the general economic basis for governmental budgetary policy than

State bodies whose actions are dependent on money supply and monetary

value and which are reliant on the short-term approval of political forces.

However, the constitutional approval of the independence of the European

Central Bank justified on this basis is limited to a primarily stability-oriented

monetary policy and cannot be transferred to other policy areas [...].

61 As the Court of Justice did not address this problem in its judgment of 16 June

2015, the Senate made clear once again in its OMT judgment of 21 June 2016:

WEISS AND OTHERS

35

The independence of the European Central Bank as well as of the national

central banks releases the public authority exercised by them from direct

national or supranational parliamentary responsibility. Therefore, their

independence when exercising Union powers, which is guaranteed by

Article 130 and Article 282(3), third and fourth sentences, TFEU, is in a

tense relationship with the principles of democracy and the sovereignty of

the people. An essential area of policy – one that by ensuring monetary

stability protects individual freedom and by regulating the money supply

influences public finance as well as the areas of policy dependent on it – is

thus removed from the directly and democratically legitimated

representatives’ authority to issue orders and from legislative supervision of

competences and means of action.

This limitation on the democratic legitimation emanating from the electorate

is as such one of the modifications of the principle of democracy envisaged

in Article 88(2) GG that is justified on the grounds of the specific

framework conditions of monetary policy (…). However, by way of

compensation, the principles of democracy and the sovereignty of the people

require that the monetary policy mandate of the European Central Bank be

interpreted restrictively and that its observance be subject to strict judicial

review in order to at least limit the decrease in the level of democratic

legitimation of the Bank’s actions to what is absolutely necessary (BVerfGE

142,123 <220 f. Rn. 187 ff.>). [Or. 43]

B. On the validity of Decision (EU) 2015/774 of the European Central Bank of 4

March 2015 on a secondary markets public sector asset purchase programme

(ECB/2015/10) in its current version (‘the PSPP Decision’)

I. Relevance to the Senate’s decision

62 Questions 1 to 4 are relevant to the Senate’s decision. If the PSPP Decision

represents a sufficiently serious exceeding of the ECB’s mandate and infringes the

Member States’ competences for economic policy and/or the prohibition of

monetary financing of budgets, the applications would be successful. The PSPP

Decision would then have to be classified as an ultra vires act under German

constitutional law (1). In that case the inaction of the Federal Government and the

Bundestag would have infringed the complainants’ constitutional rights (2).

1. Ultra vires act

63 (a) A sufficiently serious infringement requires that the action by the European

Union authority in violation of competences is manifest and that the contested act

results in a structurally significant shift in the allocation of powers to the

detriment of the Member States [...]. A structurally significant shift of

competences to the detriment of the Member States […] can be found to be

present only if the exceeding of competences carries considerable weight for the

principle of democracy and the sovereignty of the people. This is for instance the


36

case if it is capable of altering the fundamental competences of the European

Union and thereby of undermining the principle of conferral […]. Such a case can

be assumed if the exercise of the competence by the institution, body, office, or

agency of the European Union were to require a treaty amendment in accordance

with Article 48 TEU or the use of an evolutionary clause (see Opinion 2/94 of 28

March 1996, ECHR accession, ECR [1996] I-1759, paragraph 30), and thus, in

Germany, action on the part of the legislature [...].

64 (b) Action by the ECB beyond its mandate for money and monetary policy

(aa) or an infringement of the prohibition of monetary financing of budgets (bb)

would be a manifest and structurally significant exceeding of competence. [Or.

44]

65 (aa) If, by the PSPP Decision, the ECB exceeds its monetary policy mandate, it

thereby interferes with the Member States’ competence for economic policy.

Economic policy for the purposes of Title VIII of the Treaty on the Functioning of

the European Union, inasmuch as it is outside the special competences expressly

allocated to the Union (e.g. Article 121, Article 122, Article 126 TFEU), is

allocated to the Member States’ sphere of competence. The European Union is

restricted — except for certain individual exceptions governed in particular in Part

Three of the Treaty on the Functioning of the European Union — in the area of

economic policy essentially to the coordination of the measures of the Member

States (Article 119(1) TFEU). The ECB is merely to support the general economic

policies in the Union (Article 119(2), Article 127(1), second sentence, TFEU;

Article 2 second sentence, ESCB Statute). It is not empowered to conduct its own

economic policy. If it is assumed— subject to the interpretation by the Court of

Justice —that the ECB’s PSPP Decision is to be classified as an economic-policy

measure, it manifestly infringes this allocation of competences.

66 Such an exceeding of competence would likely be structurally significant. The

considerable volume of the PSPP materially influences the refinancing conditions

of the Member States and thus touches on the content of Article 126 TFEU and

the Treaty on Stability, Coordination and Governance in the Economic and

Monetary Union (TSCG) and the rules of secondary law adopted for its

concretisation. In particular, it may make financial assistance under Article 12 et

seq. ESMT superfluous. As the PSPP gives the Member States the possibility of

securing refinancing on the finance markets without notable hurdles, the directing

force of those rules, which form a material element of the shaping of the monetary

union, may be altered as a result. From the very beginning it was foreseeable that

a certain consequence of the PSPP was — and as has indeed happened in several

Member States of the euro area since the end of 2015 — that the Member States

would increase their new borrowing in order to stimulate the economy through

new investment programmes (see, on the changes in deficits and debt levels of the

Member States in the euro area, European Commission, General Government

Data, General Government Revenue, Expenditure, Balances and Gross Debt, Part

II; Tables by series, Autumn 2016, p. 158). [Or. 45]

WEISS AND OTHERS

37

67 (bb) If the PSPP Decision and the way in which it is performed infringe the

prohibition of monetary financing of budgets, that would also constitute a

manifest and structurally significant exceeding of competence.

68 The infringement would be manifest because the Treaty on the Functioning of the

European Union contains an express prohibition of the monetary financing of

budgets and the Treaty undoubtedly excludes competences of the ECB to that

extent (see, Article 123(1) TFEU; CJEU, judgment of 16 June 2015, Gauweiler,

C-62/14, EU:C:2015:400, para. 93 et seq.; judgment of 27 November 2012,

Pringle, C-370/12, EU:C:2012:756, para. 123 et seq.). It would also be

structurally significant. The current integration programme structures the

monetary union as a stability community and is a material basis for the

participation of the Federal Republic of Germany in the monetary union. It

ensures, not least, the overall budget responsibility of the German Bundestag [...].

2. Duties of German Constitutional and State institutions to act or refrain from

acting

69 An ultra vires act gives rise to duties on the part of German State institutions to act

or refrain from acting ((a) and (b)). They may be the subject of an action before

the Bundesverfassungsgericht, at least in so far as they emanate from the

integration responsibility of the Bundestag and the Federal Government (c).

70 (a) German constitutional institutions, authorities and courts may not

cooperate in the coming into being or in the transposition, implementation or

operation of ultra vires acts. [...]. That applies also to the Deutsche Bundesbank.

71 (b) The German Bundestag and the Federal Government may not, moreover,

simply accept ultra vires acts of institutions, bodies, offices and agencies of the

European Union.

72 They may indeed subsequently legitimise ultra vires acts by proposing an

amendment of primary law — in compliance with the limits imposed by Article

79(3) GG — [...] and formally transfer the sovereign powers, which were used

ultra vires, according to the procedure under Article 23(1), second and third

sentences, GG [Or. 46]. Inasmuch as this is not possible or not desired, however,

they are under a duty to work, within the framework of their competences, with

legal or political means, towards the cancellation of measures not covered by the

integration programme and also — as long as the measures continue — to adopt

appropriate arrangements so that the domestic effects of the measures remain as

limited as possible [...]. In that respect appropriate measures are to be taken to

ensure that the integration programme is adhered to. [...]. When performing these

duties, the Federal Government and the Bundestag enjoy — in a similar way to

duties to protect constitutional rights— a broad political margin, which under

certain factual and legal circumstances, can entail a specific duty to act.


38

73 These possibilities include, so far as concerns the Federal Government, in

particular an action before the Court of Justice (Article 263(1) TFEU), lodging an

objection to the measure at issue with the relevant body and the bodies controlling

it, the approach to voting in the committees of the European Union, including the

exercise of rights of veto, proposals for Treaty amendments (see Article 48(2),

Article 50 TEU) as well as instructions to subordinate bodies not to apply the

measure at issue. The German Bundestag may in particular make use of the right

to question, debate and make resolutions which it enjoys in order to supervise the

actions of the Federal Government in matters concerning the European Union [...],

and— depending on the matter concerned —also of a subsidiarity action (Article

23(1a) GG in conjunction with Article 12 (b) TEU and Article 8 of the Protocol

on subsidiarity), the right to establish a Committee of Enquiry (Article 44 GG) or

a vote of no confidence (Article 67 GG [...]).

74 The Federal Government and the Bundestag are, moreover obliged, on the basis of

their responsibility for integration, permanently to monitor the implementation of

the PSPP. This compulsory monitoring is to determine in particular whether a

specific threat to the federal budget derives in particular from the volume and the

risk structure of the bonds purchased, which may change even after their purchase.

If necessary, the Federal Government must procure information it does not

possess. A suitable means to this end could for instance be the German

Bundesbank’s duty to counsel and inform the Federal Government [Or. 47] [...].

75 (c) The Federal Government’s and the Bundestag’s duty to react, which stems

from objective law and requires that they, as a consequence of their responsibility

with respect to European integration, actively deliberate on the issue of how the

order of competences can be restored in case of ultra vires acts by institutions,

bodies, offices, and agencies of the European Union, corresponds to that extent to

a subjective right on the part of the citizen that is enshrined in Article 38(1), first

sentence, GG [...], which he can assert by means of a constitutional complaint.

II. Interpretation of EU law

76 There are doubts as to whether the PSPP Decision is compatible with the

prohibition of the monetary financing of budgets laid down in Article 123 TFEU

(1). Moreover, it may infringe Article 119 and Article 127(1) and (2) TFEU and

Article 17 of the ESCB Statute, because the PSPP, despite the declared monetary

policy aims, has an at least equivalent economic policy content on account of its

economic effects (2).

1. Infringement of the prohibition of monetary financing of budgets

77 The prohibition of the financing of budgets laid down in Article 123 TFEU also

contains a prohibition of circumvention (a). The PSPP Decision may infringe this

(b).

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39

(a) The prohibition of monetary financing of budgets

78 Article 123(1) TFEU prohibits the ECB and the central banks of the Member

States from granting overdraft facilities or any other type of credit facility to

public authorities and bodies of the Union and of Member States and from

purchasing directly their debt instruments from them (CJEU, judgment of 16 June

2015, Gauweiler, C-62/14, EU:C:2015:400, para. 94). It is true that the

Eurosystem is not generally precluded from purchasing, from the creditors of such

a State, bonds previously issued by that State (cf. CJEU, ibid., para. 95). Thus,

Article 18.1 of the Protocol on the ESCB and the ECB permits the ESCB, in order

to achieve its objectives and to carry out its tasks, to operate in the financial

markets, inter alia, by buying and selling outright marketable instruments, which

include [Or. 48] government bonds, and does not make that authorisation subject

to particular conditions as long as the nature of open market operations is not

disregarded (cf. CJEU, ibid., para. 96). Nevertheless, the ESCB does not have

authority to purchase government bonds on secondary markets under conditions

which would, in practice, mean that its action has an effect equivalent to that of a

direct purchase of government bonds from the public authorities and bodies of the

Member States, thereby undermining the effectiveness of the prohibition in

Article 123(1) TFEU (cf. CJEU, ibid., para. 97). The aim of Article 123 TFEU is

to encourage the Member States to follow a sound budgetary policy, not allowing

monetary financing of public deficits or privileged access by public authorities to

the financial markets to lead to excessively high levels of debt or excessive

Member State (cf. CJEU, ibid., para. 100). Thus, purchases made on the

secondary market may not be used to circumvent the objective of Article 123

TFEU (cf. CJEU, ibid., para. 100). A programme for the purchase of government

bonds on the secondary market must therefore have sufficient safeguards to ensure

that the prohibition of the monetary financing of budgets is observed in an

effective manner (cf. CJEU, ibid., para. 102 et seq.). Thus, potential purchasers of

government bonds on the primary market must not know for certain that the

ESCB is going to purchase those bonds within a certain period and under

conditions allowing those market operators to act, de facto, as intermediaries for

the ESCB for the direct purchase of those bonds from the public authorities and

bodies of the Member State concerned (cf. CJEU, ibid., para. 104). Accordingly,

the Member States may not, in determining their budgetary policy, rely on the

certainty that the ESCB will at a future point purchase their government bonds on

secondary markets (cf. CJEU, ibid., para. 113). Moreover, a minimum period must

be observed between the issue of a security on the primary market and its

purchase on the secondary market; there must be no prior announcement by the

ECB of its decision to carry out such purchases or of the volume of purchases

envisaged (cf. CJEU, ibid., para. 106). Purchased bonds may, moreover, be held to

maturity only exceptionally (cf. CJEU, ibid., para. 117 et seq.). Finally, purchases

must be limited or discontinued, and debt instruments purchased must be placed

back on the market, if continued intervention or further holding of the debt

instruments is (no longer) necessary to achieve the monetary policy aims (cf.

CJEU, ibid., paras 112 et seq., 117 et seq.). [Or. 49]


40

79 The Senate assumes that the Court of Justice regards as legally binding criteria the

conditions that it set out restricting the scope of the basic decision on the OMT

programme of 6 September 2012, and that failure to comply with them in relation

to other programmes that concern the purchase of government bonds would

constitute an exceeding of competence — from the point of view of the Court of

Justice, an infringement of Article 5(1), second sentence, and (4) TEU [...].

b) Subsumption

80 The PSPP concerns bonds of governments, State undertakings and other State

bodies, and also of European institutions. It is true that these bonds are purchased

exclusively on the secondary market. However, suggesting an infringement of

Article 123 TFEU is the fact that details of the purchases are announced in such a

way that they may create de facto certainty that bond issued by the Eurosystem

will also be purchased (aa), that it is not possible to verify whether the minimum

period between issue of a debt instrument and its purchase on the secondary

market is observed (bb), that so far the bonds purchased have been held without

exception until their maturity (cc) and moreover that bonds are purchased which

from the outset have a negative yield (dd).

(aa) De facto certainty as to purchase by the Eurosystem

81 It is indeed true that market participants have no legal certainty that a particular

issue of a Member State of the euro area identified by an ISIN will be acquired by

the Eurosystem. However, from the expressly announced procedures for the PSPP

(1) and the procedures that may inferred from the practice in purchasing bonds

(2), there might be sufficient de facto certainty that the bonds issued will also be

purchased by the Eurosystem (3).

(1) Procedures announced

82 Under Article 3(1) of the Decision of 4 March 2015, in principle, all euro-

denominated marketable debt securities issued by central governments of a

Member State whose currency is the euro, recognised agencies located [Or. 50] in

the euro area, international organisations located in the euro area and multilateral

development banks located in the euro area are eligible for purchases by the

Eurosystem central banks. Under the EAPP, a purchase volume of EUR 60 billion

was initially announced from March 2015, which was increased to EUR 80 billion

from April 2016 (see recital 7 of the Decision of 4 March 2015 and recital 3 of the

Decision of 18 April 2016). As a result there were purchases of bonds initially in

the amount of EUR 780 billion up to March 2016 inclusive, then a further EUR

960 billion up to and including March 2017, and finally a further EUR 120 billion

from April to May 2017, after the monthly purchase volume of the EAPP was

reduced again to EUR 60 billion (see ECB Press Release of 8 December 2016).

That gives a total volume of the EAPP of EUR 1 860 billion up to the end of May

2017. The major part consisted of purchases under the PSPP: on 12 May 2017 the

WEISS AND OTHERS

41

Eurosystem held under the PSPP assets in the amount of EUR 1 534.8 billion (see

Deutsche Bundesbank, Monthly Report, May 2017, p. 28).

83 Under Article 6(1) of the Decision of 4 March 2015 in conjunction with Article

1(3) of the Decision of 18 April 2016 on the portfolio allocation under the PSPP it

is clear that government bonds and bonds of nationally recognised institutions at

present make up 90% of the PSPP: According to Article 6(2), first sentence, of the

Decision of 4 March 2015 in conjunction with Article 1(4) of the Decision of 18

April 2016, 10% was acquired by the ECB so that 80% of the total volume of the

PSPP falls to the purchase of government bonds and bonds of nationally

recognised institutions by the national central banks. The allocation of the various

jurisdictions is to take place in accordance with Article 6(2), second sentence, of

the Decision of 4 March 2015 in conjunction with Article 1(4) of the Decision of

18 April 2016, using the key for subscription of the ECB’s capital under Article

29 of the Statute of the ESCB. Under Article 5 of the Decision of 4 March 2015 in

conjunction with Article 1(2) of the Decision of 18 April 2016 there is moreover

an upper limit per ISIN for marketable debt securities and an aggregate limit for

an issuer’s outstanding securities in respect of all debt instruments eligible for

central banks.

84 Solely with this information it is established that 90% of the PSPP will be fulfilled

with bonds of national issuers. It is also established that, within this 90%, bonds

from the various jurisdictions of the issuers will be purchased in accordance with

the ECB capital key. The purchases are made predominantly [Or. 51] by the

respective national central banks, and in relation to the total volume of the PSPP,

as to 10% by the ECB.

85 From the expressly announced arrangements it may be inferred, for example, that

each month bonds of German issuers will be purchased in a value corresponding

to 23.7% of the monthly purchase volume of the PSPP: The Deutsche Bundesbank

currently holds, with EUR 1 948 208 997.34, 17.9973% of the paid in capital of

the ECB (see, http://www.ecb.europa.eu/ecb/orga/capital/html /index.de.html).

This share must however be weighted: This is because, first, Member States

whose currency is not the euro have (partially) paid in their shares of capital

without their national central banks participating in the EAPP, which is why the

shares of the national banks of the Eurosystem must be calculated by reference to

the shares of capital paid in — only — by the Eurosystem as the 100% reference

point. Second — as Greek bonds were not within the programme, at least until 28

July 2016, and so far are not purchased — of the 19 Member States whose

currency is the euro, bonds were purchased from only 18 Member States.

Therefore the capital shares of those 18 Member States— totalling 68.3583% of

capital paid into the ECB — are to determine the 100% of relevant volume

according to which the national central banks in the implementation of the PSPP

is to be determined. Arithmetically this produces a share of 23.6951% for bonds

of German issuers.


42

(2) Arrangements inferable from the purchase practice

86 Already some months after the beginning of the PSPP in March 2015, market

participants could moreover ascertain from the bond purchase practice the share of

the PSPP in the EAPP and the relationship between government bonds and bonds

of public institutions within the Member States, and thus put a figure to the

monthly purchase volume under the PSPP and the share of national bonds in this.

87 Total purchases per month under the EAPP, initially fixed at EUR 60 billion, were

indeed subject to seasonal variations. Thus, during the holiday periods of August

and December 2015, purchases were reduced and then picked up again afterwards.

Those seasonal variations were, moreover, announced by the ECB. On average,

however, purchases were within the intended limits. In the period between March

2015 and March 2016 bonds were purchased per month, on average, in the

amount of EUR 60.475 [Or. 52] billion. The share of the PSPP in the EAPP was

from the beginning always around 80%. From this information it is possible to

determine the euro amount of purchases by the national central banks: 80% of the

monthly volume of EUR 60 billion is EUR 48 billion. For German bonds, whose

share must, arithmetically, amount to 23.6951%, from the information announced

a monthly volume of EUR 11.37 billion results. In the period between March

2015 and March 2016, the actual purchase corresponded on average to this

volume.

88 The share of the PSPP also essentially remained stable after the purchase volume

per month of the EAPP was increased in April 2016 to EUR 80 billion: the

aggregate monthly purchase volume of the EAPP lay between EUR 85.1 billion

and EUR 85.4 with sharp swings in July 2016 (EUR 80.5 billion) and August

2016 (EUR 60.5 billion). The share of the PSPP in the EAPP was initially 93.3%,

then sank to 82–85%, and has stabilised to around 80% of the EAPP.

89 It is even possible to make detailed conclusions as to which specific bond

fulfilling the PSPP criteria will be purchased within the available volume and

within the upper purchase limit — 33% per issuer. As regards the criteria

displayed by the bonds — in particular term and yield — the market has extensive

information available, as analysts examine the yields of the various bonds of the

State issuers with different terms and the market volume of these bonds. It may

therefore be assumed that the aggregate volume of the bonds available on the

market and their characteristics are known. Decisive, however, is the fact that the

supply of PSPP-eligible bonds is limited, as they must have a term of between two

and under 31 years and a minimum yield -0.4% (from January 2017 the range was

extended to a term of between one and under 31 years). According to the reports

of analysts and the press, in July 2016 62% of federal bonds with the relevant term

were no longer available for purchase (see http://www.institutional-

money.com/news/uebersicht/headline /ezb-in-der-zwickmuehle-buende-knapp-

kapitalschluessel-bei-qe-wackelt-51507/newsseite/1/). In October 2016 around

one half of all government bonds is said to have had a negative yield on the

market, just under 30% with a yield of less than -0,4%, which were therefore not

WEISS AND OTHERS

43

eligible for the PSPP (see Allianz, QE Monitor, 7 October 2016, p. 6). For

Germany, the amount available for purchase is said to have been exhausted in

February 2017 (see LBBW FITS No 40 of 7 October 2016, p. 21;

Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung,

Annual Report, 2016/17, para. 382; see also Frankfurter Allgemeine Zeitung of 6

December 2016, p. 18: Deutsche Anleihen seien nach den derzeitigen Kriterien im

Sommer 2017 erschöpft (German bonds are said to be exhausted under the current

criteria in Summer 2017). It is also expected that in the course of 2017 the supply

of Finnish (see Allianz, QE Monitor, 7 October 2016, p. 14) and Netherlands,

Austrian, Irish, Spanish and Portuguese bonds will be exhausted (see LBBW FITS

No 40 of 7 October 2016, [Or. 53] p. 21). Also the Deutsche Bundesbank reports

“signals of scarcity in the government bond market” that relate not only to Federal

Government securities but also to those of the French Republic (see Deutsche

Bundesbank, Monthly Report, November 2016, p. 46 et seq.).

90 Given the scarcity of bonds that are eligible under the programme, the probability

of purchase could turn into a de facto certainty, in particular because the upper

purchase limit — 33% per issue — is not set by reference to the part of an issue

available on the secondary market but according to the aggregate volume of an

issue, identified according to ISIN (see Article 5(1), first sentence, of the Decision

of 4 March 2015 as amended by the Decision of 5 November 2015).

(3) Extensive certainty on the part of market participants

91 Having regard to the general framework, issuers and other market participants

might have a secure expectation that a bond will be purchased up to the upper

purchase limit. The question arises whether this is a distortion of market

conditions which reduces the incentive for States to pursue a sound budget policy.

This might possibly be assumed not only where it is absolutely certain that a

particular bond will be purchased by the Eurosystem but already where this is

sufficiently probable. In that respect it may well also not depend on whether the

necessary certainty for all bonds exists. Instead it may well suffice that a Member

State can be sufficiently certain that a particular share of the bonds issued by it

will be purchased. Article 123(1) TFEU prohibits not only the financing of all

State budgets, but already that of a single State.

92 It is, on the other hand, at least doubtful whether this is precluded by the ECB’s

reference in its Statement of 15 November 2016, according to which there is no

legal obligation on the part of the central banks to purchase bonds of a particular

ISIN [Or. 54]. According to the wording of Article 123(1) TFEU itself, the

decisive element for an infringement of the prohibition of monetary financing is

not the legal obligation but the actual purchase of debt instruments. The question

therefore arises as to whether, despite the absence of a legal obligation to purchase

bonds, a de facto certainty arises out of the abovementioned general framework,

with the result that the action of the Eurosystem under the PSPP has, in practice,

the same effect as the direct purchase of government bonds of public-law


44

corporate bodies and agencies of the Member States itself. In that respect it

depends on whether market participants that purchase government bonds on the

primary market ultimately have the certainty that the Eurosystem will purchase

these bonds within a foreseeable period and under conditions that allow them to

act in the same way as intermediaries of the Eurosystem for the direct purchase of

those bonds.

(bb) Lack of verification of compliance with certain minimum periods

93 Amongst the safeguards that are intended to prevent the purchase of government

bonds from infringing the prohibition of monetary financing under Article 123(1)

TFEU is also compliance with minimum periods between the issue of a debt

instrument on the primary market and its purchase on the secondary market (see

CJEU, judgment of 16 June 2015, Gauweiler, C-62/14, EU:C:2015:400, para. 106

et seq.). Under the PSPP such a minimum period is basically provided for. Under

Article 4(1) of the Decision of 4 March 2015, to permit the formation of a market

price for eligible securities, purchases are not permitted in a newly issued or

tapped security and marketable debt instruments with a remaining maturity that

are close in time, before and after, to the maturity of the marketable debt

instruments to be issued, over a period to be determined by the Governing Council

(‘blackout period’).

94 Nothing more specific as to the form of these periods in known however. In its

Statement to the Bundesverfassungsgericht, the ECB and the Deutsche

Bundesbank maintain that details are not published in order not to impair the

formation of a market price. On the other hand, the Court of Justice has

emphasised that precisely in cases like the present one, in which EU institutions

have a broad discretion, judicial review is of particular importance, which is why

the statement of reasons required under Article 296(2) TFEU must be formulated

in such a way as to enable the persons concerned [Or. 55] to ascertain the reasons

for the measure and the Court of Justice to exercise its power of review (cf. CJEU,

ibid., para. 70).

95 Against this background it is indeed evident that publishing of details of the

blackout periods to be observed may not run counter to their purpose of a market

price formation. However, that does not preclude that the statement of reasons

owed should be given at least ex post facto in order to enable a review by the

courts of those safeguards whose non-observance led to a circumvention of the

prohibition of monetary financing. As the PSPP has in the meantime been running

for more than two years and its end is not in sight, and the ECB has not fulfilled

its obligation to state reasons in that regard, it seems doubtful whether the current

practice, under which a review by the courts of compliance with the minimum

periods is not possible in the absence of appropriate information, satisfies the

terms which the Court of Justice has laid down for the avoidance of an

infringement of the prohibition of the monetary financing of budgets.

WEISS AND OTHERS

45

(cc) Holding bonds until their maturity

96 In its judgment of 16 June 2015 (Gauweiler, C-62/14, EU:C:2015:400, para. 117)

the Court of Justice proceeded on the basis that the impact of a bond purchase

programme on the impetus to follow a sound budgetary policy is also limited by

the option of selling the purchased bonds again at any time. It concluded from this

that the consequences of withdrawing those bonds from the markets may be

temporary. The Senate, picking up on this in its OMT judgment of 21 June 2016,

held that the circumvention prohibition in Article 123(1) TFEU is not infringed if,

inter alia, purchased debt instruments are held only exceptionally to maturity [...].

97 Under the PSPP, purchased government bonds have so far — on the basis of the

Statements of the ECB and the Deutsche Bundesbank— not been sold again. It is

apparent from Article 1 of the Decision of 4 March 2015 only that the PSPP is a

programme under which the Eurosytem central banks are to purchase eligible

marketable debt securities on the secondary markets under specific conditions. In

any event, no specific provision is made for sales. The ECB and the Deutsche

Bundesbank, in their Statements to the Bundesverfassungsgericht, do indeed

proceed on the basis [Or. 56] that sales are at any time legally possible. They

state, however, that the monetary aims of the programme could suggest that — at

least during the term of the programme — no sales should take place, because

each sale would reduce the money supply, the increase in which was the aim of

the EAPP in general and of the PSPP in particular. Accordingly, the Deutsche

Bundesbank and the ECB proceed on the assumption that no sales of assets

purchased under the EAPP are to be expected in the foreseeable future (Statement

of the Deutsche Bundesbank to the Bundesverfassungsgericht of 15 November

2016, answer to Question 2 and Statement of the ECB to the

Bundesverfassungsgericht of 15 November 2016, answer to Question 2). So far,

the Deutsche Bundesbank has not resold any assets purchased under the PSPP.

According to the ECB, the ECB has so far sold individual assets only in

exceptional cases for technical reasons, such as in order to comply with an upper

limit. Decisions as to whether assets would be sold after the end of the programme

depend on monetary policy considerations. The Senate infers from these

statements that sales within the EAPP, including its sub-programmes, are regarded

as legally permissible but have not yet been practised.

98 Against this background the question arises — assuming that the statements in the

judgment of 16 June 2015 (Gauweiler, C-62/14, EU:C:2015:400) are

transferable — first whether the ECB is entitled to extend the period of a

programme at will and de facto to suspend the obligation under Article 18(1) of

the Statute of the ESCB for that period. Second, the question arises as to the

procedure after the end of the programme. It seems obvious that in this case not all

government bonds can be sold at once, because the market is likely to collapse as

a result of such a flood of supply. If, however, the Eurosystem did not begin to run

down its holdings, the result would be that sovereign debt embodied in the bonds

would be permanently withdrawn from the market. The sovereign debts would

then be tied into the Eurosystem and would play hardly any further role for the


46

markets — in particular for the creditworthiness of the issuing Member States.

They would be permanently neutralised. Even if it is to be assumed that the

instrument of quantitative easing must in principle be available to the Eurosystem

and the holding of a bond until its maturity is not excluded by Article 18(1) of the

Statute of the ESCB, the relationship between the rule and the exception [Or. 57]

of selling and holding to maturity would be reversed. It is obvious that in this case

the impulse to pursue a sound budgetary policy would be removed from the

States.

(dd) Purchase of bonds with a negative yield

99 Under Article 3(5) of the PSPP Decision of 4 March 2015, in principle, purchases

of nominal marketable debt instruments at a negative yield to maturity above the

deposit facility rate (currently -0.4%) are permissible; since 1 January 2017 even

purchases of securities with a yield to maturity below that interest rate are, in

principle, permitted. As a result of permitting negative yields to maturity and their

linkage to the deposit facility rate, government bonds yielding -0.4%, and thus

clearly in negative territory, may currently be purchased under the PSPP. The

result is that Member States which place bonds with a negative yield thereby not

only loan repayable money on the capital market but also notionally make profits

as a result of the negative yield. As, on the basis of the general arrangements for

the PSPP, issuers and other market participants may have a sure expectation that

government bonds will be purchased up to the upper purchase limit, it may be

assumed that the negative interest rates will be passed on to national central banks

purchasing on the secondary market, and the profit made by the Member States

through the issue of bonds with a negative yield is consequently financed by the

national central banks. This runs counter to the aim of Article 123 TFEU, because

this procedure, on account of the negative yield, relieves national budgets and

produces considerable incentives to take up loans. In contrast, it cannot be argued

that a risk of loss is inherent in any bond purchase on the secondary market, as the

considerations of the Court of Justice in that regard (see CJEU, judgment of 16

June 2015, Gauweiler, C-62/14, EU:C:2015:400, para. 126) concern price-related

risks of loss, whereas in the present case, on account of the negative interest rates,

losses and corresponding easing effects for the issuer’s budget are established

from the outset.

2. Exceeding the ECB’s mandate

100 Article 119 and Article 127 et seq. TFEU and also Article 17 et seq. of the Statute

of the ESCB basically contain a mandate for the ESCB in general and the ECB in

particular that is restricted to monetary policy [...] (a). [Or. 58] Alongside that, the

ESCB is merely allowed to support the general economic policy in the Union (b).

According to these principles, it is doubtful whether the PSPP decision, on

account of its volume, its implementation over more than two years and the

resultant effects, may still be regarded as covered by the ECB’s mandate (c).

WEISS AND OTHERS

47

(a) Restricted mandate for monetary policy

101 The principle of conferral applies to the competences of the ESCB (aa). Under the

Treaty on European Union and the Treaty on the Functioning of the European

Union, the ECB is responsible for monetary policy (bb). Apart from in a few

cases, competence for economic policy lies with the Member States (cc).

(aa) Independence of the ECB and the principle of democracy

102 The division of competences between the European Union and the Member States

follows the principle of conferral (Article 5(1) and (2) TEU). This applies also for

tasks and powers which the Treaties confer on the ESCB, which consists of the

ECB and the national central banks (Article 282(1), first sentence, TFEU). In

order to satisfy democratic requirements, this mandate must be narrowly limited

(1). Compliance with those limits is fully subject to review by the courts; this is

primarily for the Court of Justice, whose task is to ensure that in the interpretation

and application of the Treaties the law is observed (Article 19(1) TEU) (2).

103 (1) The independence enjoyed by the ECB and the national central banks

when exercising the powers conferred on them (Article 130, Article 282(3), third

and fourth sentences, and Article 88, second sentence, GG) represents a breach in

the requirements for the democratic authorisation of political decisions. The

Bundesverfassungsgericht has repeatedly held that the reduction in influence upon

the transfer of monetary policy competences to an independent central bank is still

compatible with democratic principles, because it takes account of the tested and

scientifically proven particularity of monetary policy that an independent central

bank is better able to secure the value of money and thus the general economic

foundation for the State’s budget policy than sovereign institutions whose

possibilities for action and means of action largely depend on the money supply

and value of money and are dependent on short term consent of political forces.

[Or. 59]. This approval under constitutional law of the independence of the ECB

justifies the need for a restrictive interpretation of its mandate. That mandate is

restricted to the area of a monetary policy primarily aimed at stability and cannot

be transferred to other policy areas [...].

104 (2) The independence of the ECB does not preclude a review by the courts

when delimiting its competences (see CJEU, judgment of 10 July 2003, C-11/00,

EU:C:2003:395, Rn. 135 ff.). On the contrary, where an EU institution enjoys

broad discretion, a review of compliance with certain procedural guarantees is of

fundamental importance (see CJEU, judgment of 16 June 2015, Gauweiler,

C-62/14, EU:C:2015:400, para. 69).

105 The independence guaranteed by Article 130, Article 282(3), third and fourth

sentences, TFEU relates only to the powers conferred on the ECB by the Treaties

and their content-related structure, but not the determination of the extent and

scope of its mandate. In accordance with the principle of conferral laid down in

Article 5(1) and (2) TEU, the ESCB must act within the limits of the powers


48

conferred upon it by primary law and it cannot therefore validly adopt and

implement a programme which is outside the area assigned to monetary policy by

primary law (see CJEU, ibid., para. 41).

(bb) Restriction to monetary policy

106 Under Article 3(1)(c) TFEU the European Union has exclusive competence for

the Member States whose currency is the euro. It is true that the Treaties do not

define the concept of monetary policy (cf. Article 119(2) TFEU; CJEU, judgment

of 27 November 2012, Pringle, C-370/12, EU:C:2012:756, paras 48, 53). This

competence is however concretised by the Treaty on the Functioning of the

European Union and the Statute of the ESCB.

107 The primary aim of the ESCB is to maintain price stability (Article 127(1), first

sentence, Article 282(2), second sentence, TFEU). According to Article 127(2)

TFEU, the basic tasks of the ESCB are to define and implement the monetary

policy of the Union (first indent), to conduct foreign-exchange operations (second

indent), [Or. 60] to hold and manage the official foreign reserves of the Member

States (third indent) and to promote the smooth operation of payment systems

(fourth indent). Chapter IV of the Statute of the ESCB concretises the monetary

policy tasks and operations of the ESCB and authorises it to open accounts

(Article 17 of the Statute of the ESCB), to conduct open market and credit

operations (Article 18 of the Statute of the ESCB), to lay down minimum reserves

(Article 19 of the Statute of the ESCB) and to use other instruments of monetary

control (Article 20 of the Statute of the ESCB). Under Article 22 of the Statute of

the ESCB the ECB and the national central banks may also provide facilities or

make regulations to ensure efficient and sound clearing and payment systems

within the Union and with other countries. Article 23 of the Statute of the ESCB

empowers it to conduct transactions with third countries and international

organisations, and Article 24 of the Statute of the ESCB to other fiscal auxiliary

transactions.

(cc) Delimitation of monetary policy and economic policy

108 Monetary policy must be distinguished, according to the wording, scheme and aim

of the Treaties, in particular from economic policy, which is primarily for the

Member States. Decisive in that regard is the objectively determined aim of a

measure, the means chosen to achieve that aim and its connection to other rules. In

order to delimit competences, the decisive criterion is accordingly, first, whether

the measure directly pursues economic policy aims. In Pringle the Court of Justice

affirmed this for the ESM, because the overall aim of the ESM was to stabilise the

euro area. Such a measure could not be treated as equivalent to a monetary policy

measure for the sole reason that it may have indirect effects on the stability of the

euro (see CJEU, judgment of 27 November 2012, Pringle, C-370/12,

EU:C:2012:756, paras 56, 97). In Gauweiler the Court of Justice repeated its view

to that effect but pointed out that a programme that may further economic policy

WEISS AND OTHERS

49

aims to a certain extent was not to be treated as equivalent to an economic policy

measure for that reason alone, since it is apparent from Articles 119(2) TFEU,

127(1) TFEU and 282(2) TFEU that, without prejudice to the objective of price

stability, the ESCB may support the general economic policies in the Union (see

CJEU, judgment of 16 June 2015, Gauweiler, C-62/14, EU:C:2015:400, Rn. 58 et

seq.). [Or. 61]

109 The delimitation of competences depends, however, not only on the aim but also

on the means chosen to achieve that aim and its effects. According to the case-law

of the Court of Justice, measures of monetary policy are, for example, the setting

of key interest rates for the euro area and the issue of euro currency (see CJEU,

judgment of 27 November 2012, Pringle, C-370/12, EU:C:2012:756, para. 95 et

seq.). On the other hand, the grant of financial assistance to a Member State

“clearly” does not fall within monetary policy (see CJEU, ibid., para. 57). If and

insofar as the ESCB grants financial assistance, it is operating an economic policy

that is forbidden to the European Union.

110 Lastly, it depends on the connection between the measures to be classified and

other rules. In particular, references in a measure to other rules and the embedding

of the measure in an overall scheme consisting of a number of individual

measures may indicate that it belongs to economic policy or to monetary policy.

Thus, with regard to the ESM, the Court of Justice proceeded on the basis that

Decision 2011/199 of the European Council of 25 March 2015, aimed at the

conclusion of the ESM Treaty, was to be regarded, on account of its reference to

the economic policy provisions of the Treaty on the Functioning of the European

Union and the acts of secondary law in the so-called Six Pack, as serving to

complement the new regulatory framework for strengthened economic governance

of the Union, and indicated that the ESM belonged to the area of economic policy

(see CJEU, ibid., paras 58 to 60).

111 In Gauweiler the Court of Justice emphasised that it follows from Articles 119(2)

TFEU and 127(1) TFEU, read in conjunction with Article 5(4) TEU, that a bond-

buying programme forming part of monetary policy may be validly adopted and

implemented only in so far as the measures that it entails are proportionate to the

objectives of that policy (see CJEU, judgment of 16 June 2015, Gauweiler,

C-62/14, EU:C:2015:400, Rn. 66). It is true that the Court of Justice allowed the

ESCB a broad discretion, since the ESCB is required to make choices of a

technical nature and to undertake forecasts and complex assessments (see CJEU,

ibid., para. 68). Nevertheless, the Court emphasised that where an EU institution

enjoys broad discretion, a review of compliance with certain procedural

guarantees is of fundamental importance. Those guarantees include the obligation

for the ESCB to examine carefully [Or. 62] and impartially all the relevant

elements of the situation in question and to give an adequate statement of the

reasons for its decisions (see CJEU, ibid., para. 69).

112 Control of budgetary policy is in any event not part of monetary policy. The

Treaties provide for the involvement of the ESCB in economic and budgetary


50

policy only to a very limited extent, namely when consulted in the deficit

procedure (Article 126(14), second subparagraph, TFEU). The position is similar

inasmuch as following the financing and sovereign debt crisis, possibilities were

created, at the level of secondary law (see Article 11(3) of Regulation (EU) No

1175/2011 of the European Parliament and of the Council of 16 November 2011

amending Council Regulation (EC) No 1466/97 on the strengthening of the

surveillance of budgetary positions and the surveillance and coordination of

economic policies, OJ 2011 L 306 of 23 November 2011, p. 12; Article 13(3) of

Regulation (EU) No 1176/2011 of the European Parliament and of the Council of

16 November 2011 on the prevention and correction of macroeconomic

imbalances, OJ L 306 of 23 November 2011, p. 25; Article 10a(3) Council

Regulation (EU) No 1177/2011 of 8 November 2011 amending Regulation (EC)

No 1467/97 on speeding up and clarifying the implementation of the excessive

deficit procedure, OJ L 306 of 23. November 2011, p. 33), and outside EU law

(cf. Article 12(1), second sentence, TSCG) possibilities have been created for a

representative of the ECB to participate in the supervisory mission of the so-called

Troika (see on this the Opinion of Advocate General Cruz Villalón of 14 Januar

2015 in Case C-62/14, Gauweiler, EU:C:2015:400, point 150, where it is

recommended that upon activation of the OMT Programme the ECB should

detach itself from all direct involvement in the monitoring of the financial

assistance programme applied to the State concerned). However, this clearly does

not have any effects on the allocation of competences between the Union and the

Member States under primary law.

(b) Mere support for the economic policy

113 Competence for the economic policy within the meaning of Title VIII of the

Treaty on the Functioning of the European Union lies — inasmuch as it goes

beyond special competences expressly allocated to the European Union

(e.g. Article 121, Article 122, Article 126 TFEU) — with the Member States.

They are competent for establishing the aims and the choice of instruments of the

economic policy (Article 5(1), Article 120 et seq. TFEU). In that respect the

Union’s role is restricted under Article 2(3) and Article 5(1) TFEU to the taking of

coordinating measures [Or. 63] (see CJEU, judgment of 27 November 2012,

Pringle, C-370/12, EU:C:2012:756, para. 64). The ESCB merely has the power to

support the general economic policies of the Union insofar as this is possible

without prejudicing the objective of maintaining price stability (Article 119(2),

Article 127(1), first sentence, Article 282(2), third sentence, TFEU; see CJEU,

judgment of 16 June 2015, Gauweiler, C-62/14, EU:C:2015:400, para. 59). The

power to support the general economic policies of the Member States at Union

level (Article 127(1), second sentence, TFEU) does not justify the steering of the

economy through the Eurosystem.

WEISS AND OTHERS

51

(c) Subsumption

114 According to these principles there are solid indications that the PSPP Decision,

on account of its volume and its implementation over a period of more than two

years, is not covered by the ECB’s mandate. In the Senate’s view, on the basis of

an overall consideration of the decisive delimitation criteria, it might no longer be

regarded as a monetary policy measure but as a predominantly economic policy

measure. It is true that the PSPP has a declared monetary policy aim and in

pursuing that aim its uses monetary policy means (aa); however, the economic

policy effects, on account of the volume of the PSPP and the associated

foreseeability of the purchase of government bonds, are directly inherent in the

programme itself (bb). Thus the PSPP might prove to be disproportionate in

relation to its underlying monetary policy aim (cc). Moreover, the Decisions

forming the basis for the programme lack a comprehensible statement of reasons

that would allow the continuing need for the programme to be kept under

continuous review during the implementation of the Decisions over several years

(dd).

(aa) Aims and means

115 The PSPP Decision is conceived as part of a uniform monetary policy, which,

according to the ECB, is intended to combat deflationary trends in the euro area

and to raise the inflation rate to below but close to 2%. The ECB’s assessment is

that the monetary policy measures implemented up to the date of the decision had

not been as successful as it expected. Most indicators suggested at that time that

the current and expected inflation in the euro area (headline indicators and [Or.

64] core inflation rate indicators after adjustment for volatile components such as

energy and food) were at a historical low and that there was increased potential of

second-round effects on wage and price-setting stemming from a significant

decline in oil prices (see recital 3 of the Decision of 4 March 2015).

116 In view of these risks, the declared aim of the PSPP is to mitigate the risks to the

outlook on price developments, including those relevant to the borrowing

conditions of euro area non-financial corporations and households. The ECB links

this to the expectation that the PSPP will support aggregate consumption and

investment spending in the euro area and ultimately contribute to a return of

inflation rates to levels below but close to 2 % over the medium term. In an

environment where key ECB interest rates are at their lower bound, and purchase

programmes focussing on private sector assets are judged to have provided

measurable, but insufficient, scope to address the prevailing downside risks to

price stability, it is said to be necessary to add to the Eurosystem’s monetary

policy measures the PSPP as an instrument that features a high transmission

potential to the real economy. Thanks to its portfolio re-balancing effect, the

sizable purchase volume of the PSPP will contribute to achieving the underlying

monetary policy objective of inducing financial intermediaries to increase their

provision of liquidity to the interbank market and credit to the euro area economy


52

(see paragraph 11 above and recital 4 of the Decision of 4 March 2015 cited

there).

117 The aim of the PSPP to raise inflation to just below 2% is, in the Senate’s view, an

in principle permissible concretisation of the task of ensuring price stability.

Assuring the mechanism for transmitting monetary policy is also part of monetary

policy (see CJEU, judgment of 16 June 2015, Gauweiler, C-62/14,

EU:C:2015:400, Rn. 47 et seq.). As the inflation rate substantially depends on

spending by private households and on the real economy, an increase in the

liquidity of commercial banks and their customers may be considered a useful

interim aim on the way to influencing an increase in prices.

118 The same holds for the measures used: Article 18.1 of the Statute of the ESCB

expressly provides that the ESCB may purchase bonds. Thus, the bond purchase

programme also belongs in principle to monetary policy means that are within its

competence (see CJEU, ibid, para. 54). [Or. 65]

(bb) Need to take economic policy effects into account

119 In the Senate’s view, it is, however, doubtful whether, solely by taking into

account the aim of a measure and the means chosen, it is possible to distinguish

between monetary policy and economic policy and to fix the limits of the

Eurosystem’s mandate. It is true that merely indirect economic policy effects of

monetary policy measures are not per se appropriate for allocating the measure in

question as a whole to the area of economic policy (see CJEU, ibid., paras 52, 59).

However, it is possible to speak of “indirect effects” only if they are merely a

consequence of the contested measure that is not definitely foreseeable and is

associated with further interim steps. It may, however, be the case that it is no

longer possible to speak of an “indirect” economic policy effect if the economic

policy effects of a measure are intended or at least knowingly accepted and they

assume a weight that is at least comparable to the monetary policy aim.

Acceptance of the aims indicated by the competent EU institutions or bodies,

together with recognition of a broad discretion on their part and a reduction of the

degree of review by the courts would seem likely to enable the institutions, bodies

and other agencies of the European Union themselves to determine the scope of

the competences which the Member States have given them to exercise [...]. Such

an understanding of competence does not take sufficient account of the principle

of conferral and the need for a restrictive interpretation of the ECB’s mandate. On

the contrary, a comprehensive assessment is required which also includes

considerations that run counter to the stated aim [...].

120 Over and above the stated monetary policy aim and independently of the degree to

which it is achieved, the PSPP has considerable economic policy effects. Solely

on the basis of its volume, its effects in steering the economy appear to be

inevitable consequences of a monetary policy aim. The PSPP intervenes in the

balance sheet structures of the commercial banks by transferring from their

balance sheets onto the balance sheets of the ECB and the national central banks,

WEISS AND OTHERS

53

on a large scale, also Member State bonds entailing a risk. This improves the

economic situation of the banks and increases their creditworthiness. In this way

the banks can sell risky securities to the Eurosystem which they otherwise would

have been unable to unload or to do so only at a loss. The de facto resultant

preponderance of economic policy may ultimately result in [Or. 66] action on the

part of the ECB that steers the economy and thus undermines the allocation of

competences under Title VIII of the Treaty on the Functioning of the European

Union.

121 The PSPP also improves the refinancing terms for the Member States. They can

obtain clearly more favourable terms for loans on the capital market than would

be the case without the programme. It is true that the conduct of monetary policy

will regularly entail an impact on interest rates and bank refinancing terms, which

always also has consequences for financing terms for the budgets of the Member

States (cf. CJEU, judgment of 16 June 2015, Gauweiler, C-62/14,

EU:C:2015:400, para. 110); also Article 18 of the Statute of the ESCB expressly

provides for the purchase of bonds as a permissible means of monetary policy (see

CJEU, ibid., para. 54). It must be asked to what extent the particularly high

volume of the PSPP and the associated quite considerable economic policy effects

as described above may result in that programme being classified qualitatively as

primarily one of economic policy. With a volume of initially, on average, EUR 48

billion per month from March 2015 and EUR 64 billion per month from April

2016 the impact on the refinancing terms of the individual Member States appears

to be a consciously accepted consequence of the PSPP, which is also of such

weight that the monetary policy aims are liable to become insignificant in

comparison. This is all the more so given that there is in fact extensive certainty

about the purchase of government bonds— as shown (see para. 80) — and the

Member States of the euro area are aware of the improvement in their refinancing

terms brought about by the bond purchases. Moreover, it should have been

foreseeable for the ECB that the States would increase their new borrowings in

order to stimulate the economy through investment programmes; as already stated,

this has predominantly happened (see para. 66). The economic policy effects of

the PSPP might therefore appear not only as the indirect consequence of monetary

policy aims but also at least as an equally important aim of the programme.

(cc) Proportionality

122 The actual effects of the purchase of government bonds under the PSPP on

changes in the inflation rate in the euro area are not quantified. On the other hand,

the PSPP has at least had the effect that, as shown, the Member States of the euro

area can use the issue of government bonds at a low interest rate as a particular

means in their budget policy [Or. 67] and that the operation of the commercial

banks has been de facto subsidised. Against the background of these considerable

economic policy effects, it is questionable whether the measures chosen to achieve

the indicated monetary policy aim are still proportionate (see para. 110). These

effects would probably be proportionate only if the ECB discernibly weighed

them against the economic policy effects of the PSPP. There is therefore much to


54

suggest that the acceptance of economic policy effects of the PSPP that are

problematic from the point of view of competence might be disproportionate to

the legitimate monetary policy aim pursued by it.

(dd) Need for a statement of reasons

123 There is moreover no specific statement of reasons in the Decisions that form the

basis for the programme and its implementation (see para. 110 in fine). The ECB

has indeed continually stressed the relevance of the PSPP for the achievement of

its aim in regard to inflation. It has not, however, given more specific reasons for

the necessity, extent and duration of the economic policy effects of the

programme; in particular, there is no weighing up of the intended monetary policy

effects of the PSPP against the additional economic policy effects to be expected.

This also has the result that the determination of the point at which the ending of

the programme is to be expected is rendered at least more difficult if not

impossible.

C. The Bundestag’s overall responsibility for budgetary policy

I. Material to the Senate’s decision

124 Question 5 is material to the Senate’s decision inasmuch as the complainants

complain of a failure on the part of the Bundestag and the Federal Government to

act in regard to a possible infringement of constitutional identity for the purposes

of Article 79(3) GG, on the ground that the PSPP leads to considerable risks for

the federal budget and impinges on the German Bundestag’s overall responsibility

for the budget.

1. Postion under domestic law

125 The purchase of government bonds under the PSSP is in principle liable to lead to

expenditure that is significant in terms of the budget or to shortfalls in revenue.

[Or. 68] There is always an inherent risk in open market transactions (see CJEU,

Gauweiler, C-62/14, EU:C:2015:400, para. 125). Even a partial default in the

government bonds would adversely affect not only the net income to be paid to

the Federal Republic (cf. § 27 of [the Law on the Bundesbank], BBankG) but

might also lead to negative net worth of the Deutsche Bundesbank. This could, at

least if it were lasting, undermine the confidence in the capacity of the Deutsche

Bundesbank, which constitutes an essential prerequisite for its functioning (see

also ECB, Convergence Report, 2014, p. 36). The same holds true for the ECB,

the loss allocation of which is governed merely by a rule that losses can be

compensated for with funds from the general reserve fund and from monetary

income (cf. Article 33.2 ESCB Statute). However, there is no provision on

compensating losses that exceed those funds [...].

126 Constitutional law requires the Federal Republic of Germany to ensure the

functioning of the Deutsche Bundesbank. Article 88, first sentence, GG protects

WEISS AND OTHERS

55

the institution of the Deutsche Bundesbank but is not limited to guaranteeing its

mere existence. Rather, the provision also encompasses the obligation to provide

the Bundesbank with such assets as are necessary to enable it to fulfil its

constitutional tasks, which are also determined by the second sentence of Article

88 GG. In that respect, Article 88 GG also gives rise to liability for an institution

(Anstaltslast) requiring the guarantor, the Federal Republic of Germany, to

guarantee the functioning of the German Bundesbank, which is a direct federal

institution (bundesunmittelbare Anstalt) under public law (cf. § 2 BBankG).

Therefore, if the Deutsche Bundesbank’s ability to function is threatened by

insufficient or even negative net equity, the Federal Republic of Germany may be

required to inject additional capital. This may also be required under Union law

(cf. European Central Bank, Convergence Report 2014, pp. 28 and 29) [...]).

2. Rules under the PSPP

127 In their Statements to the Bundesverfassungsgericht, the ECB and the Deutsche

Bundesbank have explained that in relation to the PSPP a differentiated sharing of

risks between the ECB and the national central banks is carried out on the basis of

Article 32.4 of the Statute of the ESCB (cf. ECB, Statement of 15 November

2016, p. 6 et seq.; Deutsche Bundesbank, Statement of 15 November 2016, p. 4 et

seq.): [Or. 69]

• In the case of debt instruments of national issuers that are purchased by

the national central banks — that is, in the case of 80% of the debt

instruments purchased — there is no sharing of risks.

• In the case of the debt instruments of national issuers purchased by the

ECB — that is 10% of the debt instruments purchased — there is a

sharing of risks only above the income to be allocated to the national

central banks (Article 32.5 of the Statute of the ESCB). Losses of the

ECB from purchases under the PSPP can thus impact the national

central banks only inasmuch as their shares in the monetary income are

reduced or cease completely (Article 33.2 of the Statute of the ESCB).

However, it is unclear what happens if the shares of the loss exceed the

shares of the profit.

• With regard to the bonds issued by international issuers that are

purchased under the PSPP, there is a complete sharing of risks. Losses

of a national central bank are divided amongst all national central

banks of the Eurosystem according to the capital key.

3. Significance for constitutional identity

128 Currently it is not definitely foreseeable whether, on the basis of this division of

risks, the right of the German Bundestag to decide on the budget, protected by

Article 20(1) and (2) in conjunction with Article 79(3) GG, and its overall


56

budgetary responsibility, may be affected by the PSPP Decision or its

implementation with regard to possible losses of the Deutsche Bundesbank.

129 An infringement of the constitutional identity of the Basic Law might come into

consideration, however, if a mechanism were established by the PSPP Decision

which amounted to an assumption of liability for decisions made by third persons

which entail consequences that are hard to calculate [...], so that on the basis of

that mechanism the German Bundestag did not remain “master of its decisions”

and its right to decide on the budget could no longer be exercised on its own

responsibility [...]. [Or. 70]

130 The complainants have made a plausible case in that respect that in the legal basis

for the ESCB an alteration of the sharing of risks is provided for up to a joint

liability also for the 80% of debt instruments purchased by the national central

banks from national issuers of their own State and for which currently joint

liability is not foreseen. They submit that in the event of a default in the bonds of a

central government, it is evident, if not indeed mandatory, that the Council of the

ECB will react with a decision under Article 32.4 of the Statute of the ECB which

will bring about a full sharing of risks. That amounts to a redistribution of risks of

a so far unknown magnitude for which the ECB has no mandate.

131 An unlimited sharing of risks within the Eurosystem and the resulting risks for the

calculation of the profits and losses of the national central banks would entail an

infringement of constitutional identity for the purposes of Article 79(3) GG, if it

were to make it necessary to recapitalise the national central banks to such an

extent as the Senate, in its case-law on the EFSF and ESM, has made conditional

on the consent of the German Bundestag [...]. Thus, the success of the

constitutional complaints depends on whether such a sharing of risks may be

excluded under primary law.

II. Interpretation of EU law

132 Under Article 32.4 of the Statute of the ESCB the Council of the ECB may decide

that national central banks are to be indemnified for specific losses arising from

monetary policy operations undertaken for the ESCB. That may have negative

effects on the calculation of profits and losses of the national central banks and

oblige them to increase their reserves accordingly [...]. Thus, in the financial year

2016, in respect of risk provisions, the Deutsche Bundesbank topped up its

provision for general risks by EUR 1.75 billion. The reason given for the topping

up was that the decisions of the ECB Council, in financial year 2016, on the

expansion of the EAPP and on the CSPP gave rise to an additional credit risk for

the Deutsche Bundesbank which was only partly offset by the diminishing default

risk stemming from the securities purchased under the SMP. The Deutsche

Bundesbank expected a further increase in risk provisions [Or. 71] in the 2017

annual accounts (cf. Deutsche Bundesbank, Annual Report 2016, p. 73).

WEISS AND OTHERS

57

133 The making of a decision by the Council of the ECB on the method and amount of

sharing of risks between the members of the ESCB is hardly determined by

primary law. That could enable a change by the Council of the ECB in the rules

on the sharing of risks within the Eurosystem, from which risks might result for

the calculation of profits and losses of the national central banks and furthermore

for the overall budget responsibility of the national parliaments. As a

corresponding sharing of risks has already been practised in the case of earlier

programmes (cf. with regard to the SMP, Deutsche Bundesbank, Annual Report

2010, p. 175), it does not seem to be ruled out that the Council of the ECB could

also decide upon a full sharing of risks for the area of the PSPP too.

134 Against this background, the question arises as to whether, in the event of defaults

in bonds of the central governments or equivalent issuers, an unlimited sharing of

risks between the national central banks of the Eurosystem would infringe Article

123 and Article 125 TFEU and Article 4(2) TEU (in conjunction with Article

79(3) GG).

D. Stay of proceedings

135 Proceedings are stayed pending the decision of the Court of Justice [...].

136 The Senate requests the application of the expedited procedure under Article 105

of the Rules of Procedure of the Court of Justice because the nature of the case

requires that it be dealt with rapidly. This is the case because of the high volume

and the associated, difficultly reversible, effects of the PSPP. Moreover, by

document of 24 May 2017, the complainants at IV applied for an interim

injunction [...] with the objective of forbidding the Deutsche Bundesbank, in view

of the already accrued volume, from further participation in the PSPP and to

enjoin the Federal Government to work towards the ending of the participation of

the Deutsche Bundesbank in the EAPP. [Or. 72]

137 After conclusion of the preliminary ruling proceedings, the

Bundesverfassungsgericht will continue the proceedings of its own motion.

[...]

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