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EU lawyer approves ECB bond-buying

Wednesday, January 14, 2015 - 02:24

The final hurdle to QE in the eurozone appears to have been cleared. But as Hayley Platt reports an EU court adviser - ruling on the legality of the last bond-buying scheme - has set conditions which need to be taken into account in the future.

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It wasn't even a formal ruling - just a legal opinion. But the European Court of Justice's Advocate General made markets move - the euro even tumbled below its dollar launch value. He's been reviewing the European Central Bank's 2012 bond-buying plan. His verdict…. (SOUNDBITE) (Spanish) EUROPEAN COURT OF JUSTICE ADVOCATE GENERAL, PEDRO CRUZ VILLALON, SAYING: "The Outright Monetary Transactions programme is compatible with Articles 119 and 127 of the TFEU, provided the ECB refrains from any direct involvement in the financial assistance programmes to which the OMT programme is linked." With 2015's bond-buying plan expected next week - any other verdict could have been a big problem, says Kathleen Brooks from Forex.Com (SOUNDBITE) (English) KATHLEEN BROOKS, DIRECTOR OF RESEARCH AT FOREX.COM, SAYING: "Whenever you talk about ECB policy there's always a political element to it, so having this ruling by the European Court of Justice, actually pretty much going in the ECB's favour is a real sigh of relief and does allow them to maybe pave the way towards QE. It certainly makes it more likely to happen later this month." The opinion was a clear rebuff to German critics of the plan who argue the ECB has been exceeding its mandate. ECB Executive Board member Yves Mersch said it showed the central bank had "considerable discretion" over policy. (SOUNDBITE) (English) ECB EXECUTIVE BOARD MEMBER, YVES MERSCH, SAYING: "We have always been of the conviction that OMTs are legally sound and in line with our mandate." Mario Draghi is clearly planning something - the ECB chief told a German newspaper a loose monetary policy was needed to achieve price stability. But whether he'll finally deliver on his "whatever it takes to save the euro" promise isn't quite so certain. (SOUNDBITE) (English) KATHLEEN BROOKS, DIRECTOR OF RESEARCH AT FOREX.COM, SAYING: "Even if they do announce a QE program of round about the 500 billion euro mark, that's not going to be enough to dent deflation or to reverse that situation. There's a real chance Mario Draghi will have to go back to the drawing board in a few months time." Judges still need to formally rule on the lawyer's view - which some critics say puts the bank above the law. But it's rare for them to overrule him. And he also gave the ECB another boost - he cautioned against limiting their room for manoeuvre by capping the amount of bonds they could buy.

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EU lawyer approves ECB bond-buying

Wednesday, January 14, 2015 - 02:24