ECB Grandfathers Collateral to Lessen Ratings Downgrade Impact

Helmholtz Watson

German Constitutional judges 7-1 ruling in ECB QE case

While finds for ECB it does say some action by the ECB QE program partially violates the German constitution and that some of the action is held illegal in Germany.

Further that the ECB decision is not backed by the EU treaty.

While there are caveats, this just reaffirms that PEPP is going to be untouched, which is how the market responded ‘.

Following a transitional period of no more than three months allowing for the necessary coordination with the Eurosystem, the Bundesbank may thus no longer participate in the implementation and execution of the ECB decisions at issue, unless the ECB Governing Council adopts a new decision that demonstrates in a comprehensible and substantiated manner that the monetary policy objectives pursued by the PSPP are not disproportionate to the economic and fiscal policy effects resulting from the programme. On the same condition, the Bundesbank must ensure that the bonds already purchased and held in its portfolio are sold based on a – possibly long-term – strategy coordinated with the Eurosystem.”