FRANKFURT, May 11 (Xinhua) -- A German board member of the European Central Bank (ECB) said Monday that the bank will continue its bond purchases in line with its mandate, after Germany's Constitutional Court ruled last week that the ECB's public sector purchase program (PSPP) was partly unconstitutional, whereas a German government spokesperson defended the court's decision.
Isabel Schnabel, member of the Executive Board of the ECB, said in an interview that the ECB will "continue to conduct the PSPP and the pandemic emergency purchase program, as well as other monetary policy measures, in line with its mandate."
"As stressed by the ECB's president, we are undeterred in our willingness and ability to act," Schnabel said, citing Christine Lagarde's recent remarks. "This message also seems to have been well-understood by market participants," Schnabel added.
The ECB is a European institution and the Court of Justice of the European Union (CJEU) has exclusive jurisdiction over the ECB and its actions, Schnabel explained, referring to a previous CJEU ruling in the ECB's favor.
In a ruling on Tuesday, the German Federal Constitutional Court said the ECB was "ultra vires" with regard to the proportionality of the PSPP, a major component of the ECB's quantitative easing. The German court gave the ECB three months to justify the measures under the trillion-euro program, otherwise the Bundesbank, Germany's central bank, will be prohibited from participating.
However, the CJEU delivered a preliminary ruling in December 2018 that the PSPP did not infringe EU law, nor did it go beyond the ECB's mandate. The German court's ruling has prompted the EU to a fight back over the weekend.
In a statement on Friday, the Luxembourg-based CJEU stressed that "the Court of Justice alone -- which was created for that purpose by the member states -- has jurisdiction to rule that an act of an EU institution is contrary to EU law." National courts are required to ensure that EU law takes full effect, the court noted.
European Commission President Ursula von der Leyen further defended the CJEU on Sunday, when she said in a statement that "EU law has primacy over national law and that rulings of the European Court of Justice are binding on all national courts."
"The final word on EU law is always spoken in Luxembourg. Nowhere else," she said.
Von der Leyen also said that the European Commission "will look into possible next steps, which may include the option of infringement proceedings."
Partly responding to the EU's concerns, German government spokesman Steffen Seibert told a press conference in Berlin on Monday that Germany's Constitutional Court had not questioned the role of the CJEU as the guardian of European Union treaties.
Seibert also said he agreed the German government would answer all questions from the European Commission on this subject.
Citing sources who took part in a video conference with Chancellor Angela Merkel on Monday, the German news agency dpa reported that Merkel was optimistic that a solution could be found, while admitting that the ruling had thrown a spanner in the works of the euro currency bloc.
Over the past week, the conflict surrounding the German court's ruling has been the subject of intensive discussions among economists and policymakers alike.
Friedrich Heinemann, an economist at the Mannheim-based research institute ZEW, said the German court "has correctly identified the core problem" of the PSPP.
In a statement, Heinemann said the ruling had sent a clear message that "no euro state can rely on the central bank to help solve excessive government debt," which will be of great importance for the euro zone in the post-crisis years.
On the other hand, Marcel Fratzscher, president of Berlin-based German Institute for Economic Research (DIW), said that the German Constitutional Court's ruling was "quite confrontational" and that a ruling that could prohibit the Bundesbank from acting in the ECB PSPP was "dangerous."
However, Fratzscher said he believed that the ruling would not change anything fundamental about the ECB's monetary policy and its crisis response, and that it would be easy for the ECB to demonstrate the proportionality of its purchases. Enditem
