On May 5 (Tuesday), the German court unilaterally rejected the case of the European Central Bank's quantitative easing, ruling that the European Central Bank's case of quantitative easing was unconstitutional. The short-term fluctuation of the euro against the U.S. dollar reached 1.0926, and then fell nearly 100 points, breaking the 1.09 barrier to 1.0826, creating a new low for a week. The ECB replied that it would be sufficiently committed to fulfilling its inflation responsibilities. Italy rejected the direct risk of the German court's ruling on Italian bonds, saying the decision would not stay with the ECB's asset purchases.
The euro fell nearly 100 points after a German court ruled that the Bank of Europe was unilaterally unconstitutional. The bank said it would work to restore inflation
The lawsuit was led by a group of businessmen and scholars who frequently denounced the EU. They believe that the European Central Bank has adopted economic policies improperly. The judge evaluated the quantitative easing program (QE) adopted by the European Central Bank and held that the public part asset purchase program launched by the European Central Bank since 2015 is likely to interfere too much with the economic and fiscal policies of euro zone countries.
The German court evaluated the quantitative easing program (QE) adopted by the European Central Bank (ECB), and held that the public sector asset purchase program launched by the European Central Bank since 2015 is likely to interfere too much with the economic and fiscal policies of euro zone countries. The final ruling said that the one-sided move of the European Central Bank was unconstitutional, and was not supported by the EU treaty. The effect of judge's external decision is 7:1. The ruling does not involve the European Central Bank's latest PEPP fast three betting hall. The German court gave the European Central Bank three months to fix the QE problem. If the European Central Bank (ECB) does not show that its policy is \
The decision surprised the market, with the euro briefly sliding against the US dollar, and European stocks narrowed their gains. The analysis shows that the German court's control over the European Central purchase plan will inevitably damage the flexibility of the policy.
The European Central Bank (ECB) will buy government bonds from 2015 to 2018 and restart the program in the evening of 2019. So far, the European Central Bank has bought nearly 3 trillion Euro bonds in support of the euro zone economy.
In order to avoid the euro zone's economy being dragged down by the epidemic, the European Central Bank launched a 750 billion euro bond purchase program in March this year. It is worth careful that the ruling of May 5 does not apply to the latest anti epidemic plan. \
Carsten Brzeski, the German chief economist at Dutch international, said in a notice that it would take some time to fully understand what the German Constitutional Court's ruling on the European Central Bank's quantitative easing program means today. But this is bound to be a real problem for the European Central Bank in its wake-up phase.
The European Central Bank replied that it was allowed to take all necessary measures to restore inflation. The board noted that it had carefully examined the ruling, but also pointed out sharply that the European Supreme Court had previously indicated that quantitative easing was in accordance with the law.
The board said it would remain committed to taking the total necessary measures around its mandate to ensure that inflation rose to a level consistent with the current level in the medium term and that monetary policy moves to maintain price stability were transmitted to all aspects of the economy and to all jurisdictions in the euro area.
The ECB has three months to show that its asset purchase plan is in compliance with the law. Since 2015, the European Central Bank has bought 2.7 trillion euros (about $2.9 trillion) of bonds, which are added every month.
The May 5 ruling will not immediately stop bond purchases, nor will it affect another 750 billion euro program launched in March to address the epidemic crisis. However, this really raises questions about the extent to which the ECB can boost its monetary stimulus.
Holger Schmieding, chief economist at Berenberg, said the decision was a \
Olaf Scholz, Germany's finance minister, played down the ruling, saying the court \
This is a risk for the eurozone. The ruling could put Germany's central bank out of the asset purchase plan. The plan calls for 20 billion euros a month to buy bonds, with another 120 billion euros to prepare for today's short economic fans. Germany is the largest economy in the euro zone, and its central bank accounts for the largest share of purchases.
Italy has rejected the ruling of the Central Bank of Germany, which is struggling to get out of the crisis
On May 5, Italy's finance minister, Roberto gualtieri, dismissed the direct risks to Italian bonds posed by the German court's ruling. He told lawmakers that the decision would not stay in the ECB's asset purchases, which are crucial to controlling Italy's borrowing costs. But the added uncertainty surrounding the central government's support will make it more difficult for the country to find a way out of the economic crisis caused by the spread of the epidemic.
After the announcement of the ruling, Italian bonds in the euro zone fell the most, and the yield of 10-year Treasury bonds rose 17 basis points at one time. The spread with Germany, the measure of risk, widened to 250 basis points.
Because of the attack of the epidemic on the economy, Italy's finance has become the focus of attention. The Italian authorities have agreed on a set of initial economic stimulus measures worth 25 billion euros. Another aid package worth at least 55 billion euros has been repeatedly delayed by political infighting and can be approved later this week.
However, the support relies largely on the bank's lending to enterprises supported by the authorities, and it has made slow progress in reaching the economy. Italy's finance and prime minister have asked lending institutions to speed up the process.
The figure below shows the turning point of Italy's GDP. It can be seen that the Italian economy has been in a deep depressionlong before the implementation of the comprehensive blockade measures Italy is the third largest economy in Europe. The country will be able to save much more than 150% of its GDP. The authorities' outlook for this year's output will be negative by 8%, while the institutional outlook will be negative by 13%.
Italy's finance minister, Roberto gualtieri, said he expected Italy to receive more than 160 billion euros from the EU crisis support program. About 20 billion euros came from the relief program and 40 billion from European investment banks. Another 100 billion euros could come from plans being considered by European recovery fund members.
He added that Italy had not yet decided whether to apply for a credit line from the European security facility, which would add another 36 billion euros if it succeeds.
The euro fell 0.61% to 1.0840 against the US dollar on May 5 after a German court ruled that the Bank of Europe was unilaterally unconstitutional, and maintained a weak and narrow range of volatility in Asian markets on May 6. Investors need to pay attention to whether it can keep the low of 1.0727 set on April 24.
At 9:47 Beijing time on May 6, the euro was at 1.0840/42 against the dollar.(source: huitong.com)