The long awaited decision by the German Supreme Court regarding the ECB’s OMT program was released today.  As we suspected, the court found that the OMT program was outside of the mandate of the ECB and that it violated rules prohibiting the monetarization of member government’s debt.  However, the German High Court deferred its final ruling, asking the European Court of Justice on their interpretation.  The financial markets did not react negatively, assuming that the European Court of Justice will render a Euro friendly decision.

We will revisit this subject again towards the end of March, as that is when we can expect the ECJ to make some sort of response.  A negative decision for the ECB’s OMT program would re-ignite the Euro government debt crisis — which is why the markets are cynically assuming that the ECJ ruling will be market friendly.

I just wanted to touch on this news, given that the ruling was several months overdue.

Leave a Reply

Your email address will not be published. Required fields are marked *