Thread by @henrikenderlein

The German Constitutional Court ruling (#BVerfG). Summary thread.

1) The main implication is not at the surface. ECB can continue quantitative easing and Bundesbank will in all likelihood continue to participate. What has changed today is the independence of the ECB.

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2) The BVerfG raises the question of the limits of ECB independence. This is big. They insist that the ECB independence ends when the ECB starts to get into "economic policy" as opposed to "monetary policy".

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3) The problem is that the border between monetary policy and its economic implications can't be defined. The BVerfG looks economically naïve here. But I think this is deliberate - and almost vicious: BVerfG wants to keep discretion to decide on this border all by itself.

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4) This gets us to the main implication of this ruling: The BVerfG puts the ECB under constant threat. The real intention of the judges might be to push the ECB to internalize ordoliberal thinking ex-ante, so that no ruling ex-post is necessary.

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5) The ruling will have direct effects on the way ECB can continue to operate. First, the PEPP, which is a merger of QE + OMT without conditionality, will need to be rethought by the ECB. BVerG implicitly signals the PEPP could be ok, but only if several conditions are met.

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6) So the ECB approach to do "whatever it takes" will no longer work - unless ECB accepts a conflict with BVerfG and parts of the German public. This will weaken the ECB in markets and in politics. Even if there is no direct legal ruling, the threat will always be there.

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7) From a European integration perspective, the ruling is a disaster. The signal by a national court that the CJEU's assessment is not "comprehensible" and "ultra vires" is a major blow to the EU. How would Germany react if Hungarian or Polish Courts issued such statements?

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8) Jacques Delors recently warned "the germ is back" and pointed to the lack of European solidarity as a mortal danger to the EU. Today's ruling by BVerfG marks the return of legal nationalism. And as economists know: for a monetary union, economic nationalism can be lethal.

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