FRANKFURT (Reuters) - The European Central Bank could face more legal challenges over the policy tools it has deployed to shore up confidence and boost growth in the euro zone, Udo di Fabio, a former judge of Germany’s Constitutional Court, said on Wednesday.
His comments come a day after the European Court of Justice set Oct. 14 as the date for its first hearing on a complaint against the ECB’s flagship Outright Monetary Transactions (OMT) bond-buying scheme. That case has the potential to weaken the tool which the ECB created to head off speculation of a euro zone breakup in 2012.
The OMT case was referred to the European court by the German Constitutional Court in February, saying there was good reason to think the plan - which has yet to be used - exceeded the ECB’s mandate and violated a ban on it funding governments.
The case was lodged in Germany by more than 35,000 plaintiffs. The German top court will have the final say.
Di Fabio, who was between 1999 and 2011 a judge at the German Constitutional Court in charge of European as well as public international law, said he expected to see further lawsuits, especially against the ECB’s most recent policy steps.
“I expect something to come up,” di Fabio said in Frankfurt.
The ECB has ventured deeper into uncharted waters as the euro zone recovery failed to gain traction, and most recently launched a plan to buy asset-backed securities (ABS) - taking care to differentiate the securities it would buy from the much more complex ABS which have been blamed for driving the global financial crisis.
The OMT’s power lies in the promise of potentially unlimited sovereign bond purchases - a prospect that calmed fears about the currency area falling apart and backed up ECB President Mario Draghi’s vow to do “whatever it takes” to save the bloc.
Any restriction would unnerve investors but the history of the court has not been to scupper such bloc-wide measures.
Reporting by Andreas Framke; Writing by Eva Taylor; Editing by Ruth Pitchford