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On the @bundesbank/@ecb/@BVerfG saga, just a couple of thoughts. In short, I think the @BVerfG's demands have been satisfied, but a precedent has been set. 1/x

Germany’s Bundesbank said it will continue to take part in ECB asset purchases bloomberg.com/news/articles/…
@GeneralTheorist provided a compelling and informed analysis of the dynamics at play and how they might affect the outcome. There was a chance that @bundesbank would play hard ball & reject the @ecb's rather confrontational approach. 2/x
But the way this weird episode ultimately ended was perhaps always more likely and indeed deeply European. Of course, the @BVerfG's open defiance of the @EUCourtPress's relaxed attitude to @ecb QE could have empowered the @bundesbank, which was never a big fan of OMT/PSPP etc 3/x
@bundesbank could have said "look our own constitutional court is pressuring us to drop out of the bond purchase program, you [the @ecb] need to limit/end these programs." While the claim will not disappear, I believe it was too dangerous to be leveraged now. 4/x
The current economic and financial situation is extremely fragile. We are not talking about inflation being 1% below target. We are talking about the largest drop in EZ GDP in history. Put in @BVerfG lingo, anything is proportional. This is kitchen sink throwing territory. 5/x
And yes, we are talking about the PSPP here, but markets would have been spooked by the prospect of the @bundesbank stopping PSPP purchases & there would have immediately asked "so what about PEPP"? It is simply the wrong time to test the resilience of the Eurosystem. 6/x
On legal terms, if the plaintiffs go back to the @BVerfG to challenge the response (as they will most likely do), I doubt that they are going to be successful, for (at least) 3 reasons: 7/x
1/ Karlsruhe’s core demand was that "the Federal Government and the Bundestag […] take steps seeking to ensure that the European Central Bank conducts a proportionality assessment”. Thus, Karlsruhe explicitly shifted the burden of executing the judgement to these organs. 8/x
Bundestag, @BMF_Bund & @ecb (see e.g. ecb.europa.eu/press/key/date…) took various actions to ensure compliance with the @BVerfG. While some may say this was "show", it was undoubtedly the most open & extensive communication between 🇩🇪 authorities & @ecb in the history of the €. 9/x
2/ Regarding Karlsruhe’s requirement that the ECB GovC "adopts a new decision that demonstrates [proportionality]", the 3-4 June minutes of the ECB GovC arguably comply with that standard, even if they are not a "decision" in the narrowest sense. 10/x ecb.europa.eu/press/accounts…
3/ We know that @BVerfG Judges Huber and Wallrabenstein have made positive remarks as to the approach taken by the German authorities (AND the ECB) (). Now that the @bundesbank is also formally on board, I doubt Huber et al. would easily walk back. 11/x
Yes, a lot of ink has been spilt. But the optimist in me thinks that we can (& already have) learn(ed) from it. The 🇩🇪 govt has certainly been encouraged to do more on the fiscal front. The @ecb has shown flexibility but also a need to communicate better/more openly. 12/x
Economists have suddenly developed a keen interest in Verfassungsidentität and ultra-vires acts. Lawyers have realized that the distinction between monetary and fiscal policy is at least as blurry as that between national constitutional and EU law. 13/x
The PSPP decision has no doubt set a new standard & any future @ecb action will (also) be benchmarked against the @BVerfG's standards. New challenges will be unavoidable. While the spat seems over (and the @BVerfG looks pale) I think the @BVerfG achieved what it wanted. 14/x
I think you could compare this US Supreme Court's decision in Madison v. Marbury (1803): while the SCOTUS did not enforce the Constitution in this specific case, it established (for the first time) that it can review all governmental actions. en.wikipedia.org/wiki/Marbury_v…. 15/end
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