European central Bank’s OMT decision: Still within the framework of the monetary policy?

Abstract

This contribution looks into the details of the ECB’s Governing Council Decision of 6 September 2012 on Outright Monetary Transactions (OMTs) in secondary sovereign bond markets with a view to exploring whether the controversies raised around the ECB’s alleged transgression of its mandate in the context of the OMTs are wellgrounded. Th e authors analyse the legal basis for the ECB’s activity and attempt to answer the question whether the OMT programme may be interpreted as a monetary policy instrument compatible with the EU law, notably the prohibition of monetary financing laid down in Article 123 TFEU. Th e authors contend that, given the inherent overlap of economic and monetary policies, drawing a clear demarcation line between them is neither possible, nor desirable. Th is delimitation lacuna under the EU law leaves the ECB a convenient margin of manoeuvre to intervene for the sake of maintaining financial stability of the monetary union on the one hand, and the ECJ to legally leverage such intervention by prudent, but capable legal hermeneutics. Consequently, there is currently no basis for challenging the legality of OMTs under the EU law, albeit the question of possible transgression of the ECB’s mandate remains open in respect of such modalities of OMT implementation which would provide defaulting Member States financial assistance detached from financial markets logic and discipline.