FRANKFURT (Reuters) – European Central Bank policymakers argued over the timing and size of their emergency stimulus programme this month but agreed that bond buys are the best tool in the circumstances and their benefits outweigh costs, accounts of the ECB’s June 4 meeting showed on Thursday.
Seen as an indirect response to the a challenge by Germany’s Constitutional Court, the ECB defended the asset buys, arguing that ample evidence has been amassed to prove that buying government bonds was the best way to revive the euro zone economy and prop up inflation.
Germany’s Constitutional Court ruled last month that the ECB overstepped its mandate with over 2 trillion euros of government bond purchases, ordering the Bundesbank to quit the scheme unless the ECB can prove proportionality within three months.
“There was now ample evidence from an exhaustive literature showing that asset purchase programmes in general and the Public Sector Purchase Programme in particular had proven effective in achieving their intended effects on the euro area economy and thereby in maintaining price stability,” the ECB said in the accounts of the meeting.
Policymakers agreed on Wednesday to give vital documents to German authorities to prove proportionality but the ECB will not directly engage in the process, leaving the Bundesbank to spearhead the process.
In parallel, the ECB has been drawing up contingency plans to carry out its multi-trillion bond-buying programme without the Bundesbank and launch an unprecedented legal action against the German central bank.
Facing the biggest economic contraction in generations, policymakers at the June meeting extended emergency bond purchases until mid-2021 and increased them by 600 billion euros to 1.35 trillion euros to help governments finance their crisis response.
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