The European Court of Justice’s (ECJ) ruling that the European Central Bank’s (ECB) bond-buying programme is “necessary” and “in principle” has seen the Euro fall to a nine-year low against the dollar – the lowest point since its creation in 1999.
Opposition to the scheme had been raised by Germany, who said that it equated to economic policy, which is outside the bank’s mandate.
However, the court’s advocate general, Pedro Cruz Villalon, ruled that the ECB does have the right to buy government bonds via its Outright Monetary Transactions scheme, but must meet certain conditions and thoroughly justify its actions. While this is not the same as a binding decision by the court, the ECJ only occasionally contradicts its advocate generals.
Despite the weak performance of the Euro today, the scheme, which has never been used, is intended to calm financial panic in the markets as a precursor to quantitative easing. Its announcement during the Eurozone crisis is thought to have helped to slow spiralling borrowing costs for Italy and Spain.