BERLIN, Aug. 15 (Xinhua) -- The German Federal Constitutional Court has deferred judgment over the legality of the European Central Bank's (ECB) ongoing bond purchasing program to the European Court of Justice (ECJ) on Tuesday.
The Karlsruhe-based constitutional court hereby responded to a widely-publicized legal challenge it heard against the ongoing Eurozone monetary stimulus officially known as the Expanded Asset Purchase Program (EAPP).
A group of German plaintiffs, including academics and politicians, has accused the ECB of acting in breach of Germany's constitution and outside of its own mandate by indirectly financing governments with these quantitative easing measures.
While the judges refrained from offering a verdict themselves, Federal Court president Andreas Vosskuhle said there were "significant reason to believe" that the ECB's so-called Public Sector Purchasing Program (PSPP) within the wider EAPP was indeed illegal.
"A program which entails the purchase of government bonds on secondary markets (where government bonds are traded on a day to day basis by private sector actors, note) must be endowed with sufficient guarantees to ensure that the prohibition of monetary state financing is effectively observed," a statement by the court read.
The judges further argued that monetary policy, which was the remit of the supranational ECB, had to be clearly delineated from economic and fiscal policy for which Eurozone member states were responsible.
"In the view of the senate [of constitutional judges] the PSPP resolution...could no longer amount to a monetary policy but rather a mainly economic policy measure," the court explained its decision to seek further clarification of the matter by the ECJ.
In spring of 2015, the ECB had begun purchasing securities worth 80 billion euros each month, the majority of which has been made up of government bonds purchased by the national central banks of Eurozone member states.
In April, the monthly scale of the program was reduced to 60 billion euros. While there is no final expiration date for EAPP, the ECB is expected to further downsize its purchases as the Eurozone's economic recovery picks up speed.
The ECB has acquired assets worth more than 1.5 trillion euros since launching its Quantitative Easing measures.
Eurozone inflation in June was still below the ECB's two percent goal at 1.3 percent, but unemployment throughout the 19-member bloc has fallen to the lowest level since 2009 and first quarter growth remained strong at 0.6 percent.
The German Federal Constitutional Court's ruling on Tuesday marked the second time that it has passed a challenge against ECB policy to the European Court of Justice after hearing an earlier challenge against so-called Outright Monetary Transactions (OMT).
The lawyer and plaintiff Gunnar Beck described the deferral on EAPP as "the best possible news in the sense that it practically confirmed all our arguments according to which the ECB exceeds its mandate."
Beck expressed disappointment, however, that the Karlsruhe judges had not halted German participation the program themselves and instead "delegated the task to the ECJ which will simply disregard it."
The ECB responded to German ruling by saying that the "extended asset purchase program is in our opinion fully within our mandate. That is ultimately for the European Court of Justice to assess."
Speaking ahead of the decision on Tuesday, German Finance Minister Wolfgang Schaeuble (CDU) said that he anticipated a gradual exit of the ECB from its ultra-loose monetary policy and hoped that the current low-interest rate environment would soon come to an end.
