A Legal Analysis of the OMT Case: Between Monetary Policy and Constitutional Conflict

In 2012 the ECB announced its Outright Monetary Transactions (OMT) programme, a new scheme conferring it power to purchase selectively Eurozone government bonds in secondary markets. In Gauweiler, in response to a preliminary reference made by the German Constitutional Court initiating a dialogue of conflict, the ECJ held that the the programme falls within the scope of monetary policy, that the ESCB has power to implement it provided it complies with the principle of proportionality, and that, subject to certain conditions, the purchase of government bonds does not infringe the prohibition of the monetary financing of the budget. Whilst the ECJ sets some limits to ECB’s powers, it is a judgment of institutional empowerment. Essentially, the tensions and instability arising from the separation of competences in monetary and economic policy gravitate to the advantage of the Union. By placing emphasis on the objectives rather than the effects of measure and linking OMT power to conditionality, Gauweiler builds on Pringle providing normative legitimization to the austerity model whist granting the ECB a distinct role not only in monetary policy but also in shaping the general economic policy of the Union.