Post by Paul on Mar 1, 2016 9:38:07 GMT 4
Gauweiler and the Legality of Outright Monetary Transactions
Paul P. Craig
University of Oxford - Faculty of Law
January 27, 2016
(2016) 41 European Law Review 1
Oxford Legal Studies Research Paper No. 5/2016
Abstract:
There is an interesting symmetry in the two leading
cases concerning the legality of measures to tackle the financial
crisis. In Pringle the argument was that the European Stability
Mechanism was unlawful, because it concerned monetary policy and hence
fell outside the competence of the Member States. In Gauweiler the
converse argument was deployed, the principal contention from the
Bundesverfassungsgericht being that the programme for Outright Monetary
Transactions concerned economic policy, and was outside the remit of
the ESCB. It was central to both claims that the measures infringed
either Article 123 or Article 125 TFEU, which ensured that the state
remained responsible for its indebtedness, limiting the extent to which
EU institutions or Member States could provide financial assistance. The
CJEU rejected the argument in both cases, and this article considers
the issues raised by the Gauweiler litigation.
The discussion
begins with the role of the European Central Bank in the financial
crisis, and the measures it adopted to restore financial balance. This
is followed by analysis of the preliminary reference from the
Bundesverfassungsgericht, which is set against its well-known
jurisprudence on ultra vires and identity locks. The reference was
especially significant given that it was the first time that the
Bundesverfassungsgericht had used Article 267 TFEU.
The focus
then shifts to the CJEU’s ruling, which followed much of the reasoning
of Advocate General Cruz Villalón and rejected the central tenets of the
Bundesverfassungsgericht’s argument. We consider in detail the CJEU’s
reasoning, and juxtapose this to the Bundesverfassungsgericht’s
conceptualisation of the case. The central assumptions of the two courts
differed, with the CJEU conceptualising the case in terms of monetary
policy transmission, while the Bundesverfassungsgericht framed its
reasoning in terms of the impact of OMT on interest rate spreads. It
will be argued that the CJEU’s reasoning is to be preferred and that its
conclusion was legitimate in the light of the relevant Treaty
provisions.
The penultimate section of the article considers the
Bundesverfassungsgericht’s possible response to the CJEU’s ruling. This
is perforce conjecture, but it is possible nonetheless to make reasoned
inquiry as to aspects of the CJEU’s ruling that the
Bundesverfassungsgericht might be able to accommodate, and those that it
will feel more difficult to accept. The final section of the article
places this inquiry into the broader context of other judicial review
actions concerning the legality of measures adopted to deal with the
financial crisis.
cases concerning the legality of measures to tackle the financial
crisis. In Pringle the argument was that the European Stability
Mechanism was unlawful, because it concerned monetary policy and hence
fell outside the competence of the Member States. In Gauweiler the
converse argument was deployed, the principal contention from the
Bundesverfassungsgericht being that the programme for Outright Monetary
Transactions concerned economic policy, and was outside the remit of
the ESCB. It was central to both claims that the measures infringed
either Article 123 or Article 125 TFEU, which ensured that the state
remained responsible for its indebtedness, limiting the extent to which
EU institutions or Member States could provide financial assistance. The
CJEU rejected the argument in both cases, and this article considers
the issues raised by the Gauweiler litigation.
The discussion
begins with the role of the European Central Bank in the financial
crisis, and the measures it adopted to restore financial balance. This
is followed by analysis of the preliminary reference from the
Bundesverfassungsgericht, which is set against its well-known
jurisprudence on ultra vires and identity locks. The reference was
especially significant given that it was the first time that the
Bundesverfassungsgericht had used Article 267 TFEU.
The focus
then shifts to the CJEU’s ruling, which followed much of the reasoning
of Advocate General Cruz Villalón and rejected the central tenets of the
Bundesverfassungsgericht’s argument. We consider in detail the CJEU’s
reasoning, and juxtapose this to the Bundesverfassungsgericht’s
conceptualisation of the case. The central assumptions of the two courts
differed, with the CJEU conceptualising the case in terms of monetary
policy transmission, while the Bundesverfassungsgericht framed its
reasoning in terms of the impact of OMT on interest rate spreads. It
will be argued that the CJEU’s reasoning is to be preferred and that its
conclusion was legitimate in the light of the relevant Treaty
provisions.
The penultimate section of the article considers the
Bundesverfassungsgericht’s possible response to the CJEU’s ruling. This
is perforce conjecture, but it is possible nonetheless to make reasoned
inquiry as to aspects of the CJEU’s ruling that the
Bundesverfassungsgericht might be able to accommodate, and those that it
will feel more difficult to accept. The final section of the article
places this inquiry into the broader context of other judicial review
actions concerning the legality of measures adopted to deal with the
financial crisis.
Note: This article was written jointly with Menelaos Markakis, a doctoral student at Oxford University.