From Karlsruhe, with Love? Questioning the Constitutionality of Unconventional Monetary Policy

Abstract

The programme of outright monetary transactions (OMT) announced by the European Central Bank, allowing it to act in effect as a lender of last resort for Eurozone states in financial difficulty, has widely been credited as an economic success. Constitutionally, however, the programme has faced difficulties. The German Constitutional Court challenged it earlier this year as ultra vires and unconstitutional, and now the European Court of Justice will rule on its legality. The case is noteworthy as being the first ever reference from Karlsruhe to Luxembourg, testing the relationship between the most powerful domestic court in Europe and the supranational court of the EU. But the challenge raises the broader issue of the fate of the Eurozone and the EU itself, exposing the weakness of the constitution of Economic and Monetary Union and its ‘currency without a state’.

Keywords: European Union, EU law, Outright Monetary Transactions, German Constitutional Court, Eurozone crisis