May 7, 2020
By Andreas Rinke and Paul Carrel
BERLIN (Reuters) – German lawmakers are debating whether to require their national central bank, the Bundesbank, to report to them on European Central Bank policy after the country’s top court took aim at an ECB stimulus plan, parliamentary sources said.
In a ruling on Tuesday, the Constitutional Court gave the ECB three months to justify bond purchases under its flagship stimulus programme or risk losing the Bundesbank as a participant, raising questions about the scheme and about the euro’s future.
The judges also called on the German parliament and government to challenge the ECB on the matter.
But lawmakers are leaning towards seeking contact with the Bundesbank on ECB policy rather than with the ECB directly, parliamentary sources said after meetings on Wednesday of parliament’s finance, budget and European affairs committees.
The Bundesbank is the biggest of the euro zone’s national central banks, which implement ECB policy decisions such as bond purchases.
“One possibility could be an ongoing reporting obligation for the Bundesbank to the Bundestag,” said Katja Leikert, deputy leader of the conservative CDU/CSU parliamentary group, adding that the court’s decision had strengthened parliament’s hand.
“The federal government should also involve the Bundestag more closely in monetary policy decisions,” she added.
ECB policymakers regularly appear in the European and national parliaments, but accepting political interference in monetary policy matters would be anathema to the central bank, for whom independence is sacrosanct.
Jens Weidmann, president of the fiercely independent Bundesbank, regularly joins cabinet meetings and exchanges information with lawmakers. But no formal procedure requires him to report to parliament on ECB policy.
That flows from the extreme measure of independence afforded the Bundesbank at its creation. It differs sharply from provisions of other central banks, whose chiefs regularly face grillings from their national parliament.
Formed in 1957, the German central bank was a model for central bank independence in the years that followed. In the 1990s, a Bundesbanker giving a speech in deepest Bavaria could send shockwaves across global markets.
“Not all Germans believe in God, but they all believe in the Bundesbank,” Jacques Delors, former president of the European Commission, joked in 1992.
In 1997, then-German finance minister, Theo Waigel, was sent packing when he asked Bundesbank chief Hans Tietmeyer to revalue the bank’s gold reserves to help the government wriggle out of a fiscal straightjacket and ease the path to the euro’s launch.
DECISION TIME
Christian Lindner, leader of the liberal Free Democrats, said Tuesday’s ruling would ultimately force euro zone governments to choose between sharing financial risks, for example by issuing common bonds, or else a “strengthening of the policy of fiscal responsibility”, which he preferred.
“In the short term, the ruling may not have much impact, because the ECB can explain the proportionality of its bond purchases in writing,” Lindner said.
“But in the medium and long term, this will determine the debate on the development of economic and monetary union.”
Christian Petry, European affairs spokesman for the parliamentary group of the Social Democrats, junior partner in Chancellor Angela Merkel’s ruling coalition, called for Germany to show more solidarity with its euro zone partners.
“Now we are forced to decide, and that is good,” he said of the ruling. “Now the wheat separates from the chaff: supportive community or egoistic, cold-hearted nationalism?”
Lawmakers stressed that no final decision on closer parliamentary scrutiny of the ECB had been taken.
Franziska Brantner, a Green Party politician, warned: “The ECB is only obliged to provide information to one parliament – that is the European Parliament.”
For that reason, she also favoured parliamentary contact via the Bundesbank, which is also the ECB’s preferred way out of a potential conflict with national institutions.
A legal analysis by the Bundestag’s research service showed parliament should legally oblige the Bundesbank to inform it about its activities as a member of the system of euro zone central banks.
(Writing by Paul Carrel; Editing by Larry King and Hugh Lawson)
