Judgment — ECLI:EU:C:2015:400
Date: 2015-06-16
Language of the case: German
Court formation: Grand Chamber
Subject matter: European Central Bank (ECB);Economic and monetary policy;Euro
Procedure: Reference for a preliminary ruling
Origin: Germany

summary, and in view of the considerations set out above, the OMT programme decided upon by the ECB, as it results from the technical features described in the press release, does not infringe the principle of proportionality. Accordingly, the OMT programme may be considered lawful, provided that, should the programme be implemented, the requirements regarding the statement of reasons and proportionality are strictly complied with. c) Answer to the first question referred for a preliminary ruling 203. Accordingly, in response to the first question referred by the BVerfG, I consider the OMT programme to be compatible with Article 119 TFEU and Article 127(1) and (2) TFEU, provided that, in the event of that programme being implemented, the ECB – refrains from any direct involvement in the financial assistance programmes to which the OMT programme is linked, and – complies strictly with the obligation to state reasons and with the requirements deriving from the principle of proportionality. B – The second question referred: compatibility of the OMT programme with Article 123(1) TFEU (prohibition of monetary financing of the States of the euro area) 204. By its second question, the BVerfG asks whether the OMT programme, in authorising the purchase on the secondary market by the ECB of bonds of States that are members of the euro area, infringes the prohibition laid down in Article 123(1) TFEU, under which the purchase directly from the Member States of debt instruments is prohibited. 205. According to the BVerfG, although the OMT programme formally complies with the condition expressly set out in Article 123(1) TFEU, which concerns solely the purchase of debt instruments in the primary market, the programme none the less, in its view, may circumvent the prohibition concerned, since the ECB’s interventions on the secondary market, just like purchases on the primary market, in fact represent financial assistance by means of monetary policy. In support of that view, the BVerfG refers to various technical features of the OMT programme: the waiver of rights, the risk of default, the retention of the bonds until maturity, the possible time of purchase and the encouragement to purchase in the primary market. According to the BVerfG, those are all clear indications that the effect is to circumvent the prohibition laid down in Article 123(1) TFEU. 1. Position of the parties taking part in these proceedings 206. The applicants in the main proceedings submit, deploying arguments which to a large extent coincide, that the OMT programme infringes Article 123(1) TFEU. In that respect, they share the doubts of the referring court concerning those specific aspects of the programme which are said to confirm that the programme circumvents the prohibition laid down in Article 123(1) TFEU. 207. Mr Huber’s particular concern is that the purchase of government bonds on the secondary market gives rise to circumvention of the prohibition in Article 123(1) TFEU, specifically the prohibition in the last part of the provision. Mr Bandulet stresses what he regards as the excessive risk assumed by the ECB in making purchases such as those provided for in the OMT programme, whilst also criticising the ‘collectivisation’ of losses that it involves, which entails a breach of the Treaties and of the ‘no bail-out principle’. 208. Mr von Stein also contends that the effect of the programme is to circumvent the prohibition, further pointing to the impact of a measure such as the OMT programme on the EU market. He submits that a massive purchase of government bonds would distort competition in the internal market and would also entail an infringement of Article 51 TFEU and of Protocol No 27 on the internal market and competition. 209. All the States that have participated in these proceedings, together with the Commission and the ECB, contend that the OMT programme is compatible with Article 123(1) TFEU, maintaining that purchases of government debt instruments are expressly provided for in the Treaties. They point out that Article 123(1) TFEU prohibits only purchases of government debt instruments directly from a Member State, whilst Article 18.1 of the Protocol of the ESCB and of the ECB expressly empowers the ECB and the central banks of the Member States to carry out operations of that kind. 210. At the same time, however, the French Republic, the Italian Republic, the Kingdom of the Netherlands, the Republic of Poland and the Portuguese Republic, together with the Commission and the ECB, recognise that the final part of Article 123(1) TFEU also includes a prohibition on circumvention, in other words a prohibition on entering into transactions which have the same effect as a direct purchase of government bonds. That interpretation is confirmed, so they argue, by Regulation No 3603/93, specifically by the seventh recital in the preamble thereto. 211. In that respect, various States, such as the Republic of Poland, the French Republic and the Kingdom of the Netherlands, together with the Commission submit that the ECB would not circumvent the prohibition in Article 123(1) TFEU if it were guaranteed that the bond issued by the State concerned had reached a price under market conditions. In those circumstances, provided that the measure had a monetary policy objective, there would be no infringement of Article 123(1) TFEU. 212. In that respect, the States participating in these proceedings, the Commission and the ECB deny that the features of the OMT programme referred to result in the programme being incompatible with Article 123(1) TFEU. The terms in which those technical features are described in the press release and the drafts of a decision concerning the OMT programme which the ECB has drawn up but whose adoption is still pending, confirm the ECB’s particular concern to avoid any distortion of the market contrary to Article 123(1) TFEU. Specifically, attention is drawn, as evidence of the precautions taken by the ECB, to the fact that the purchase of debt is subject to the requirements of monetary policy, to the fact that there is no prior announcement indicating the time or the volume of the purchase, to the fact that it is possible to suspend or limit purchases depending on the volume of debt issued by the State concerned, to the ECB’s refusal to accept debt restructurings and to the existence of an ‘embargo period’ between the issue date and the date of purchase by the ECB on the secondary market. 213. Finally, the Federal Republic of Germany seeks from the Court of Justice an interpretation of Article 123(1) TFEU which may be reconciled with the constitutional identity of the Member States. After drawing attention to the context in which this reference has been made, the Federal Republic of Germany submits that the interpretation of Article 123(1) TFEU must also comply with the constitutional requirements of the Member States. 2. Analysis 214. Taking a similar approach to the one adopted in my answer to the previous question, I shall start by placing the prohibition in Article 123(1) TFEU in the broader context of its position in the scheme of economic and monetary union. I shall then address the question of the compatibility of the OMT programme with that provision, considering individually each of the technical features to which the referring court draws attention. a) The prohibition of monetary financing of the Member States (Article 123(1) TFEU) and the purchase of government bonds by the ECB 215. The economic and monetary union which comprises the Union today is governed by a set of principles relating both to its objectives and to its boundaries, which overall represent its ‘constitutional framework’. Because of the significance of those principles, the Treaties expressly entrench them, making them into mandatory provisions that are inviolable by the institutions and the Member States, which may be amended only by means of an ordinary Treaty-amendment procedure. Although, from among those objectives, attention should be drawn to the mandate of maintaining price stability and achieving financial stability (Articles 127(1) TFEU and 282 TFEU), the most relevant restrictions are the prohibition on assuming the commitments of Member States (Article 125 TFEU) and the prohibition of monetary financing of the Member States (Article 123 TFEU). 216. It is the second of those prohibitions with which we are concerned here but, obviously, a precise understanding of that prohibition can be achieved only if consideration is given to its origin, the system of which it forms part and the objectives which underlie it. I shall briefly consider matters below, while drawing for support on the findings which the Court of Justice and the Advocate General (EU:C:2012:675) have already made in respect of Article 123 TFEU in the Pringle case (EU:C:2012:756). 217. The preparatory documents which culminated in the Treaty of Maastricht, in which the provision that is now Article 123 TFEU (formerly Article 104 of the Treaty establishing the European Community) first appeared, show that the main concern of the negotiators responsible for fashioning the institutional framework of economic and monetary union was the maintenance of sound budgetary discipline which would not undermine the smooth functioning of the single currency. (85) The possibility of there being Member States with very fragile public finances was regarded as a situation that was scarcely compatible either with stable growth in the euro area or with the limited monetary policy tools available to the ECB. As the States of the euro area transferred their monetary policy competences to a common institution whilst at the same time retaining their competences in economic matters, it was essential to provide for the means necessary to ensure strict financial discipline in the States of the euro area. (86) That concern gave rise to the rules on budgetary discipline provided for in Article 126 TFEU, whereby the Member States are subject to certain budgetary deficit objectives, and also to the prohibitions in Articles 125 TFEU and 123 TFEU, which prevent, respectively, the financing of Member States by other States or their financing by the ECB or the central banks of the Member States. 218. Article 123 TFEU therefore reflects a very real concern on the part of those who drew up the institutional framework for economic and monetary union, which is why it was decided to introduce into primary law an absolute prohibition on any forms of financing States which could jeopardise the objectives of fiscal discipline laid down in the Treaties. One of those prohibited forms is so-called ‘monetary financing’, whereby a central bank, the institution with power to issue money, purchases a State’s debt instruments. It is clear that this form of financing may jeopardise that State’s ability to meet its financial obligations in the medium and long term, while it may also be a significant source of price inflation. Since a common economic and monetary policy presupposes the existence of States with healthy public finances and a policy whose priority is the maintenance of price stability, it is obvious that, in such circumstances, a monetary financing mechanism significantly impairs those objectives. 219. The foregoing considerations lead me to think that the prohibition of monetary financing contributes, at Union level, as the Court of Justice has already stated in Pringle when referring to Article 125 TFEU, ‘to the attainment of a higher objective, namely maintaining the financial stability of the monetary union’. (87) In short, the prohibition in question assumes the status of a fundamental rule of the constitutional framework that governs economic and monetary union, exceptions to which must be interpreted restrictively. 220. Similarly, a reading of Article 123 TFEU in its context confirms not only the importance of the principle underpinning the prohibition, but also its restrictive nature. In contrast with Article 125 TFEU, which prohibits Member States from being ‘liable for’ or ‘assuming’ the commitments of another Member State, Article 123 TFEU is drafted in stricter terms. That contrast between the two provisions was highlighted by the Court of Justice in Pringle, (88) which confirmed the compatibility with Article 125 TFEU of measures for the granting of credit between Member States, an activity which, by contrast, is expressly prohibited by Article 123 TFEU, as it rules out ‘overdraft facilities or any other type of credit facility’. 221. However, when Article 123 TFEU is interpreted contextually, that also results in a significant qualification regarding the scope of the prohibition. That concerns, as will be explained below, the particular treatment prescribed for transactions whereby the ECB and the central banks of the Member States purchase government bonds of the Member States. 222. An issue of government securities is one of the principal financing sources available to a State. A person who acquires government bonds from an issuing State is, by definition, financing that State, directly or indirectly, and does so for consideration that makes the legal transaction into a sort of loan. The holder of the government bond has a right to seek repayment of a debt from the issuing State, thus converting it into a creditor of the State. The State issues the instrument subject to an interest rate initially set at the time of issue and determined on the basis of supply and demand. The transaction entered into by the two parties, the issuing State and the purchaser of the government bond, therefore has the same structure as the granting of a loan. All that explains sufficiently why Article 123(1) TFEU includes a final clause, which also prohibits ‘the purchase directly from [the Member States] by the European Central Bank or national central banks of debt instruments’. 223. That part of the provision was originally added in the final stage of the drafting of the Treaty of Maastricht, (89) and its inclusion can be understood only if regard is had to Article 18.1 of the Statute of the ESCB and of the ECB. As has been explained above, that provision of the Statute enables the ECB and the central banks to operate in the financial markets by buying and selling outright or under repurchase agreement and by lending or borrowing claims and marketable instruments. Operations of that kind are fundamental and essentially serve the purpose of control by the ESCB of the monetary base of the euro area; they include operations relating to the purchase of government bonds in the secondary market. (90) 224. Therefore, the final part of Article 123(1) TFEU must — as the ECB affirmed in response to questions raised at the hearing — be interpreted in conjunction with Article 18.1 of the Statute of the ESCB and of the ECB, since only in that way is there legal cover for a traditional monetary policy measure consisting in the purchase of government bonds on the secondary market. Without the final part of Article 123(1) TFEU, Article 18.1 of the Statute of the ESCB and of the ECB would have to be interpreted as precluding transactions in government bonds on the secondary market, which would deprive the Eurosystem of a vital tool for the ordinary conduct of monetary policy. 225. That said however, it is clear that, given the importance of Article 123 TFEU, it would not be sufficient for the ECB to confine itself to purchasing government bonds on the secondary market in order to avoid infringing the prohibition in that provision. I rather take the view that, in the interpretation of Article 123 TFEU, the focus must be particularly on the substance of the measure. That approach, frequently used by the Court of Justice in interpreting provisions of the Treaties, should also be applied in the case of Article 123 TFEU, as has, moreover, been acknowledged by all the Member States participating in these proceedings, by the Commission and by the ECB itself. 226. That concern is also reflected in secondary legislation, specifically in Regulation No 3603/93, which was adopted before the establishment of the ECB and which makes express mention of the prohibition on circumventing the rule in the provision concerned. The seventh recital to Regulation No 3603/93 states that the Member States must take appropriate measures to ensure, in particular, that ‘purchases made on the secondary market [are not] used to circumvent the objective of that Article’. (91) 227. Accordingly, I take the view that Article 123(1) TFEU not only prohibits direct purchases on the primary market but also prevents the ECB and the national central banks from undertaking operations on the secondary market whose effect is to circumvent the abovementioned prohibition. In other words, the Treaty does not prohibit operations on the secondary market but it does require that, when the ECB intervenes on that market, it does so with sufficient safeguards to ensure that its intervention does not fall foul of the prohibition of monetary financing. 228. Having clarified those points, consideration should now be given to whether the OMT programme, under which the ECB intervenes on the secondary government bond market, may, despite observing the letter of the final part of Article 123(1) TFEU, entail a measure which circumvents the prohibition set out in that provision. b) The OMT programme and its compatibility with the prohibition laid down in Article 123(1) TFEU 229. As a preliminary point, before examining the OMT programme specifically from the angle of the prohibition on monetary financing of the Member States laid down in Article 123(1) TFEU, I should like to make clear that this answer starts from the assumption that, in any future implementation of the OMT programme, the principle of proportionality will, as I have explained in my proposed answer to the first question, be observed. That is the basis on which a number of the considerations which I put forward below are to be understood. 230. As I have already noted, the BVerfG, like the applicants in the main proceedings, is of the view that the OMT programme infringes Article 123(1) TFEU since it circumvents the prohibition laid down therein. In that regard, the referring court points to a series of technical features which, in its view, bear out that conclusion. The States participating in these proceedings, the Commission and the ECB challenge the BVerfG’s assessment, relying on those very same technical features. 231. As will be seen below, the doubts of the BVerfG are based on a particular interpretation of the press release of 6 September 2012. The ECB has rejected that interpretation and has produced evidence in support of its arguments. In its view, the point of those technical features is in fact that they should operate as a set of guarantees intended to prevent circumvention of Article 123 TFEU. 232. Having made those points, I shall now examine individually the technical features to which the referring court has drawn attention. i) Waiver of rights and pari passu status 233. The full or partial waiver of claims securitised in government bonds of the State subject to the OMT programme is the first feature which, according to the BVerfG, could render the programme contrary to Article 123(1) TFEU. In the referring court’s view, as in that of a number of the applicants in the main proceedings, the fact that the ECB and the central banks do not have the status of preferential creditor but rank pari passu and may be obliged to accept a full or partial waiver in the context of a restructuring agreement, (92) makes the measure into an indirect means of financing the debtor State. 234. I do not find that argument convincing. In the first place, it must be borne in mind that the risk of a full or partial waiver relates only to a future and hypothetical situation entailing the restructuring of the debtor State’s debt and is not, so to speak, an intrinsic component of the OMT programme. As I have already explained in points 193 and 194 of this Opinion, the assumption of risk is inherent in a central bank’s activity, so that an event such as that described by the referring court cannot become, merely because it might conceivably occur, a necessary consequence of implementation of the programme. 235. Moreover, the ECB has stated in its written observations that, in the context of a restructuring subject to CACs, it will always vote against a full or partial waiver of its claims. In other words, the ECB will not actively contribute to bringing about a restructuring but will seek to recover in full the claim securitised on the bond. The fact that the ECB acts with a view to preserving its claim in full confirms that the aim of its conduct is not to grant a financial advantage to the debtor State but to ensure that the latter meets the obligation it has entered into. 236. Finally, I think that the point should also be made that a purchase by the ECB, as a non-preferential creditor, of the debt securities of a Member State will inevitably involve a degree of distortion of the market, which appears to me, however, to be tolerable from the point of view of the prohibition in Article 123(1) TFEU. By contrast, as has been explained in point 183 of this Opinion, purchases made with the status of preferential creditor deter other investors, since they send out the message that a significant creditor, in this case a central bank, will be given preference over other creditors in the recovery, with the impact that that will have on demand for bonds. Accordingly, I take the view that pari passu clauses may be regarded as a means that seeks to ensure that the ECB disrupts the normal functioning of the market as little as possible, which, ultimately, involves a further guarantee of compliance with Article 123(1) TFEU. 237. I therefore consider that the fact that the ECB might be obliged — in the hypothetical event of a restructuring of a Member State’s debt — to waive, in full or in part, its claims securitised in government bonds, as a result of the OMT programme being activated, does not mean that the programme amounts to a monetary financing measure contrary to Article 123(1) TFEU. ii) Default risk 238. The BVerfG also points out that a purchase of government bonds with a, to some extent foreseeably, low credit rating exposes the ECB to an excessive default risk and is therefore incompatible with Article 123(1) TFEU. Although the referring court itself recognises that the assumption of risk is inherent to the activity of a central bank, it considers that the Treaties do not authorise exposure to losses of a significant amount. 239. Once again, I refer to the reasoning set out in points 193 to 198 of this Opinion, in which I dealt in some detail with the assumption of risks by the ECB. To my mind, that reasoning may perfectly well be applied to the present aspect of the case, since, as has been observed above, the fact that there is a possibility — which purely on principle cannot be discounted — of the ECB’s insolvency or a Member State’s default does not convert the risk, on that ground alone, into a certainty. The fact that a programme for the purchase of government bonds exposes the ECB to a risk is, as one might expect, inherent in this kind of operation and, consequently, doubts as to legality need arise only when the technical conditions of the programme, or its subsequent specific implementation, confirm that the ECB is clearly faced with a default scenario. 240. In fact, the technical features of the OMT programme do not suggest that the ECB is exposed, with any degree of foreseeability, to a scenario like the one depicted by the BVerfG. It should be recalled that the central objective of the OMT programme is to stabilise the interest rates applicable to certain government bonds with the ultimate aim of restoring the instruments of monetary policy. However, the immediate objective (the reduction of the financing costs of the State concerned) itself contributes to that State recovering its ability to meet its obligations in the medium and long term. The framework in which the OMT programme would be accorded is intended to eliminate or at least reduce such a risk. As I have already pointed out in point 197 of this Opinion, the fact that, considered as a whole, the transactions announced in the OMT programme confirm the ECB’s intention of guarding against or preventing more or less irrational processes which generate or significantly increase risks, tends to establish that a measure such as that at issue does not entail circumvention of the prohibition in Article 123 TFEU. 241. I consider, in short, that that intention on the part of the ECB has been sufficiently established for it to be concluded that a purchase of government bonds — even ones with a low credit rating — which may expose the ECB to a degree of risk of default, is not as such contrary, in the circumstances described, to the prohibition of monetary financing laid down in Article 123(1) TFEU. iii) Holding the bonds until maturity 242. The BVerfG also asserts that holding government bonds until maturity may conflict with Article 123(1) TFEU, since it reduces the number of bonds circulating on the secondary market, thereby disrupting the normal development of market prices. 243. It is true, as the BVerfG has argued, that if the ECB were to purchase government bonds under an obligation to hold them until maturity, that would give rise to a significant distortion on the secondary market for government securities. The secondary government bond market would have to reckon with the presence of an investor — the ECB — holding a substantial portfolio of government bonds which would not circulate on that market, regardless of the way in which their market price developed. 244. The ECB has, in response, emphasised that at no point in the press release of 6 September 2012 is it stated that government bonds purchased under the OMT programme will be held until maturity. (93) 245. The ECB’s arguments appear to me to be conclusive. That is not only because the Bank has declared that it is not its intention to hold the government bonds it purchases until maturity but also because it is established that that was the practice followed in earlier programmes in which the ECB was active on the secondary government bond market. (94) It is logical that that should be the case, since the ECB has explained that intervention on the secondary market must be characterised by a considerable degree of flexibility, which permits it to implement the OMT programme and, at the same time, carry out transactions which do not result in it making losses and which do not distort the market overmuch. To my mind, the flexibility with which the ECB wishes to proceed, as it is described in the draft Decision, is consistent with the requirements referred to above. Furthermore, the fact that the OMT programme concerns exclusively transactions in bonds with a maturity of between one and three years tends to confirm that the ECB has taken precautions to avoid both the risk of losses and the distortion of the market. 246. Finally, it is clear that the OMT programme in the form we know it does not contain anything which suggests that there is an express obligation, either in the press release of 6 September 2012 or in the event of the programme being implemented, to hold the government bonds until maturity. The BVerfG’s misgivings in that regard are thus unfounded. iv) Time of purchase 247. The referring court also points out that the fact that the ECB purchases government bonds on the secondary market on a large scale and only a short time after their issue has an effect similar to that of a direct purchase in the primary market: it submits that that is contrary to Article 123(1) TFEU. 248. Admittedly, a purchase on the secondary market that is made seconds after the issue of the bonds on the primary market could completely blur the distinction between the two markets, although, formally, the purchase has taken place on the secondary market. This is not a possibility that can entirely be ruled out, since, as has been explained in various written and oral observations submitted in these proceedings, a transaction on the secondary market may in fact take place barely moments after the purchase made directly from the issuing State. 249. The ECB has insisted that the BVerfG’s concern in this regard is unfounded since transactions under the OMT programme will be subject to a so-called ‘embargo period’, by virtue of which the Eurosystem will not carry out any transactions until a given number of days have passed since the issue, although that number will not be announced in advance. The ECB argues that the embargo period permits a market price to form for the relevant bonds and that it will thus not intervene at the time of issue but some days later, once a market price has formed. 250. It seems to me that the BVerfG’s concern is not unfounded in view of the possibility, to which Mr Bandulet alludes, of the transactions taking place at virtually the same time: proceeding in that way would, in practice, circumvent the prohibition in Article 123(1) TFEU. The ECB itself appears to share that view, as it has repeatedly asserted that it has not made purchases of that kind in the past and that it will not make them under the OMT programme. (95) 251. There is nothing in the press release, however, which permits the conclusion to be drawn that a particular ‘embargo period’ will be observed. 252. In my view, any implementation of the OMT programme must, if the substance of Article 123(1) TFEU is to be complied with, ensure that there is a real opportunity, even in the special circumstances in issue here, for a market price to form in respect of the government bonds concerned, in such a way that there continues to be a real difference between a purchase of bonds on the primary market and their purchase on the secondary market. 253. Lastly, however, the point should be made that it is not essential for the ‘embargo period’ in question to be precisely determined and publicised in advance. On the other hand, as the ECB has rightly pointed out, while it is necessary to avoid an extremely short period which would contravene Article 123(1) TFEU, it is also necessary to avoid a period that is too prolonged, which might result in an overlap with other ongoing operations, with the result that the OMT programme would be rendered much less effective. It seems permissible that the ECB should have a broad discretion with regard to the precise definition of those periods, provided that those periods actually provide an opportunity for the price of the bonds to be substantially in line with market values. 254. It is therefore my view that, if the OMT programme is to be compatible with Article 123(1) TFEU, it must, in the event of it being activated, be implemented in such a way that it is possible for a market price to form in respect of the government bonds concerned. v) Encouragement to purchase newly issued bonds 255. Finally, the BVerfG points out that an announcment that the OMT programme is to be activated in a particular case will have the effect of encouraging purchases of newly issued bonds, thus acting as a magnet to investors, which would make the ECB into a ‘lender of last resort’, with the consequent assumption of the risks which that would entail. 256. Both the ECB and the Commission contend that this assessment is based on an incorrect premiss, since it presupposes that there will be a public announcement before the ECB starts buying bonds. The press release of 6 September 2012 does not indicate that the ECB will proceed in that way; it is rather the reverse, since a prior, detailed announcement specifying the exact point at which such purchases are to be undertaken would severely undermine the objectives of the OMT programme. 257. I concur with the position taken by the ECB and the Commission. There is nothing in the press release of 6 September 2012 which indicates that the ECB will give detailed notice in advance either of the features of the specific programme it intends to implement or of the exact point at which its operations will commence. On the contrary, the previous practice of the ECB in the context of similar programmes, as well as the part of the draft Decision on the OMT programme concerning ‘embargo periods’, show that the Bank will proceed with particular caution when intervening on the secondary market, in order to forestall speculative behaviour that would severely undermine the efficacy of the OMT programme. 258. The referring court’s objection could be more readily accepted if the ECB were actually pursuing a strategy of detailed public communication which would provoke immediate changes on the market at a given time, as the result of the ECB’s previous announcement. In my view it is unlikely that that course of action will be taken and the ECB’s previous practice bears that out. 259. That said, it should, however, be pointed out again that it is almost inevitable, in view of the characteristics of the OMT programme, that implementation of the programme to some extent includes an incentive to investors to purchase bonds on the primary market. Although the immediate objective of the OMT programme is to reduce to normal levels the interest rates required of certain Member States, with the indirect aim, of course, of unblocking the monetary policy transmission channels, it is obvious that such normalisation presupposes an increased demand on the primary market. That is why the incentive to purchase is practically inherent in the OMT programme. 260. It is thus of fundamental importance that such effects on economic operators are compatible with the objective which the OMT programme, were it implemented, would be expected to achieve: that brings us once again to the importance of compliance with the principle of proportionality, including from the perspective of the prohibition under consideration here. 261. Accordingly, I consider that, on the basis of the press release of 6 September 2012, there are not sufficient grounds to suggest that putting the OMT programme into effect will, as a result of its activation and announcement, amount to a disproportionate encouragement to purchase newly issued bonds. 3. Answer to the second question referred for a preliminary ruling 262. In conclusion, and in response to the second question referred by the BVerfG, I consider that the OMT programme is compatible with Article 123(1) TFEU, provided that, in the event of the programme being implemented, the timing of its implementation is such as to permit the actual formation of a market price in respect of the government bonds. VII – Conclusion 263. In the light of the foregoing, I propose that the Court of Justice answer the questions referred for a preliminary ruling by the Bundesverfassungsgericht as follows: (1) The Outright Monetary Transactions (OMT) programme of the European Central Bank, announced on 6 September 2012, is compatible with Article 119 TFEU and Article 127(1) and (2) TFEU, provided that, in the event of that programme being implemented, the ECB – refrains from any direct involvement in the financial assistance programmes to which the OMT programme is linked, and – complies strictly with the obligation to state reasons and with the requirements deriving from the principle of proportionality. (2) The OMT programme is compatible with Article 123(1) TFEU, provided that, in the event of the programme being implemented, the timing of its implementation is such as to permit the actual formation of a market price in respect of the government bonds. 1 Original language: Spanish. 2 Judgment 126, 286, pp. 303 and 304. 3 The actual wording of Mr Draghi’s speech was as follows: ‘When people talk about the fragility of the euro and the increasing fragility of the euro, and perhaps the crisis of the euro, very often non-euro area Member States or leaders underestimate the amount of political capital that is being invested in the euro. And so we view this, and I do not think we are unbiased observers, we think the euro is irreversible … But there is another message I want to tell you. Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.’ For the full text of Mr Draghi’s speech, see http://www.ecb.europa.eu/press/key/date/2012/html/sp120726.en.html. 4 Points 17 to 32. 5 BVerfGE, 89, 155 (1992). 6 123 BVerfGE 267 (2009). 7 2 BvR 2661/06. 8 It is enough to refer, by way of example, to the arguments explaining why the concept of ‘constitutional identity’ under national law cannot be equated with ‘national identity’ under Article 4(2) TEU (point 29 of the order for reference). 9 See the dissenting opinions of Judge Lübbe-Wolff and Judge Gerhardt in respect of the decision to make the present reference for a preliminary ruling. In particular, see the arguments of Judge Lübbe-Wolff (point 28) and those of Judge Gerhardt (points 14 to 18) 10 Point 25 of the order for reference. 11 Points 26 and 27 of the order for reference. 12 To this effect, see also the observation made in point 11 of the dissenting opinion of Judge Lübbe-Wolff, referred to above. 13 The Court of Justice has stated on many occasions that the preliminary ruling procedure cannot be used as a procedure for the delivery of advisory opinions. According to the case-law, the rationale for a request for a preliminary ruling is not that it enables advisory opinions on general or hypothetical questions to be delivered but rather that it is necessary for the effective resolution of a dispute (see, inter alia, judgments in Djabali, C‑314/96, EU:C:1998:104, paragraph 19, Alabaster, C‑147/02, EU:C:2004:192, paragaph 54, and Åkerberg Fransson, C‑617/10, EU:C:2013:105, paragraph 42). 14 See, inter alia, Craig, P., ‘The ECJ and ultra vires action: A conceptual analysis’, Common Market Law Review (2011) 48; Kumm, M., ‘Who Is the Final Arbiter of Constitutionality in Europe?’, Common Market Law Review (1999), 36; Millet, F.-X., ‘L’Union européenne et l’identité constitutionnelle des États membres’, LGDJ, Paris, 2013; Payandeh, M., ‘Constitutional review of EU law after Honeywell: Contextualizing the relationship between the German Constitutional Court and the EU Court of Justice’, Common Market Law Review (2011) 48. 15 See, inter alia, in addition to the decisions of the BVerfG cited above in footnotes 5 to 7, the judgments of the French Constitutional Council of 27 July 2006 and 9 June 2011 (Decisions Nos 2006-540 DC and 2011-631); the declaration of the Spanish Constitutional Court of 13 December 2004, 1/2004; the judgments of the Italian Constitutional Court 183/1973 and 168/1991; the judgment of the Danish Supreme Court of 6 April 1998 (I 361/1997); the judgment of 11 May 2005 of the Polish Constitutional Court (K 18/04) or the judgment of the Supreme Court of the United Kingdom of 22 January 2014 ([2014] UKSC 3). 16 Sunstein, C., One Case at a Time. Judicial Minimalism on the Supreme Court, Ed., Harvard University Press, Cambridge, 2001. 17 On this point, see Martinico, G., ‘Preliminary Reference and Constitutional Courts: Are You in the Mood for Dialogue?’, in Fontanelli, F., Martinico, G., and Carrozza, P., Shaping Rule of Law through Dialogue: International and Supranational Experiences, Europa Law Publishing, Groningen, 2010; Alonso García, R., Justicia Constitucional y Unión Europea, 2nd ed., Thomson-Civitas, Madrid, 2014; Ukrow, J., ‘Von Luxemburg lernen heißt Integrationsgrenzen bestimmen (Anmerkungen zur Vorlage-Entscheidung des Bundesverfassungsgerichts vom 14. Januar 2014)’, Zeitschrift für Europarechtliche Studien, 2014, p. 122; Mayer, F., ‘Multilevel Constitutional Jurisdiction’, in Bogdandy, A., and Bast, J. (ed.), Principles of European Constitutional Law, 2nd ed., Hart-Beck-Nomos, 2010; and Komárek, J., ‘The Place of Constitutional Courts in the EU’, (2013) 9 European Constitutional Law Review. 18 See the case-law of the BVerfG cited in point 24 of the order for reference. 19 Point 33 of the order for reference. 20 Point 28 of the order for reference and the references therein to ‘constitutional identity’. 21 This is the literal wording of Honeywell, as reproduced by the referring court in point 24 of its order for reference. 22 Honeywell, paragraph 61. 23 On the reference for a preliminary ruling and its role in the EU judicial system, see Lecourt, R., L’Europe des juges, Bruylant, Brussels, 2008, and Ruiz-Jarabo Colomer, D., La Justicia de la Unión Europea, Thomson-Civitas, Madrid, 2011. 24 Points 5 to 12 of the Italian Government’s written observations. 25 See Funke, A., Virtuelle verfassungsgerichtliche Kontrolle von EU-Rechtsakten: der Schlussstein?: Anmerkung zu BVerfGE 126, 286 (Honeywell bzw. Mangold-Urteil EuGH), Zeitschrift für Gesetzgebung, 26, No. 2, 2011, p. 172. See also Hobe, S., ‘Abkehr von Solange? — Die Entscheidungen des Bundesverfassungsgerichts zur Vorratsdatenspeicherung und zu Honeywell’, in Sachs, M., and Siekmann, H., Der grundrechtsgeprägte Verfassungsstaat Festschrift für Klaus Stern zum 80. Geburtstag, Duncker & Humblot, Berlin, 2012, p. 753. 26 Point 26 of the order for reference. 27 According to the BVerfG, in ‘borderline cases’ of transgressions of competence by the Union, the perspectives of each of those courts may not ‘fully’ coincide given that, on the one hand, the Member States remain the ‘masters of the Treaties’ and, on the other, EU law does not have a position (primacy or priority application) which is the same as that of the law of the Federal State vis-à-vis that of the Länder (supremacy). 28 Point 27 of the order for reference. 29 See Pizzorusso, A., Il patrimonio costituzionale europeo, Il Mulino, Bologna, 2012, Chapters IV and V. 30 See Vosskuhle, A., ‘Der Europäische Verfassungsgerichtsverbund’, TranState Working Papers No 16, Staatlichkeit im Wandel – Transformations of the State, Bremen, 2009, p. 22, citing Häberle, P., Europäische Verfassungslehre, 6th Ed., Nomos, Baden-Baden, 2009, p. 478 et seq. 31 See the initiative taken some months ago by a group of 35 lawyers proposing that a provision be included in the Law on the BVerfG as a reaction to the fact that no reference was made to the cooperative relationship in the judgment of 30 June 2009. That proposal is available at www.europa-union-de/fileadmin/files_eud/Appell_Vorlagepflicht_BVerfG.pdf. 32 See, to this effect, Streinz, R., ‘Der Kontrollvorbehalt des BVerfG gegenüber dem EuGH nach dem Lissabon-Urteil und dem Honeywell-Beschluss’, in Sachs, M., and Siekmann, H., Der grundrechtsgeprägte Verfassungsstaat, Festschrift für Klaus Stern zum 80. Geburtstag, Duncker & Humblot, Berlin, 2012, p. 978. 33 That is how the German Government has expressed itself in its written and oral submissions in these proceedings when emphasising the need for the Court of Justice to interpret the Treaties in this case in such a way that a conflict is avoided between the essential components of the constitutional order of the Member States and EU law. 34 The effects of the clause concerning respect for national identity (Article 4(2) TEU) in the context of a possible reference for a preliminary ruling from the BVerfG are a matter of debate (see Dederer, H.-G., ‘Die Grenzen des Vorrangs des Unionsrechts’, JuristenZeitung, 7/2014). See, in this regard, the Commission’s suggestion concerning a precautionary extension of the European framework for review, perhaps by means of a further reference for a preliminary ruling in the unlikely event that the BVerfG, even if the legality of the EU act were confirmed by the Court of Justice’s answer, should decide to declare that act ultra vires (point 37 of the Commission’s observations). 35 In this regard, the BVerfG considers (point 66 of Honeywell) that the ultra vires review should not be detrimental to the principle of integration and should be exercised, to use its own words, ‘cautiously’ or ‘moderately’ (‘zurückhaltend’). Above and beyond that, the particular nature of the interpretive methods of the Court of Justice should lead the national court itself not to substitute its own interpretive methods for those of the Court of Justice. That is the sense of the national court’s statement that it would be legitimate for the Court of Justice to have an ‘expectation’ that possible mistakes should, to a certain degree, be tolerated (‘Anspruch auf Fehlertoleranz’). 36 See, inter alia, judgments in CBR and Others v Commission (8/66 to 11/66, EU:C:1967:7), paragraph 91; Sucrimex and Westzucker v Commission (133/79, EU:C:1980:104), paragraphs 12 to 19; and Gauff Ingenieure v Commission (182/80, EU:C:1982:78), paragraph 18. 37 Judgment in Friesland Coberco Dairy Foods (C‑11/05, EU:C:2006:312), paragraphs 38 to 41. 38 See the case-law cited in footnote 36. 39 See the judgments in Grimaldi (322/88, EU:C:1989:646), paragraphs 8 and 9, and Deutsche Shell (C‑188/91, EU:C:1993:24), paragraph 18. 40 22/70, EU:C:1971:32. 41 Ibid., paragraph 42. 42 Ibid., paragraph 53. 43 Ibid., paragraph 54. 44 C-366/88, EU:C:1990:348. 45 Ibid., paragraph 10. 46 See Blinder, A.S., Ehrmann, M., Fratzscher, M., de Hann, J, Jansen, D.-J., Central Bank Communication and Monetary Policy. A Survey of Theory and Evidence, and Woodford, M., Fedspeak: Does It Matter How Central Bankers Explain Themselves?, Columbia University, April 2013. 47 In the opinion of the current Chairman of the United States Federal Reserve, Ms Yellen, ‘The effects of monetary policy depend critically on the public getting the message about what policy will do months or years in the future’. Speech at the Society of American Business Editors and Writers 50th Anniversary Conference, Washington D.C., available at http://www.federalreserve.gov/newsevents/speech/yellen20130404a.htm. 48 Central European Bank, The Monetary Policy of the ECB, Frankfurt, 2011, p. 94 et seq. 49 C‑370/12, EU:C:2012:756. 50 Articles 119(2) TFEU, 127(1) TFEU and 282(2) TFEU and Articles 2 and 3, paragraph 3.3, of the Statute of the ESCB and of the ECB. 51 In particular, see the Report on Economic and Monetary Union in the European Community, better known as the Delors Report, of 17 April 1989, in particular point 32. 52 See, inter alia, Dyson, K., and Featherstone, K., The Road to Maastricht. Negotiating Economic and Monetary Union, Oxford University Press, Oxford, 1999, p. 378 et seq., Ungerer, H., A Concise History of European Monetary Integration. From EPU to EMU, Quorum Books, Westport-London, 1997, p. 209 et seq., and Viebig, J., Der Vertrag von Maastricht. Die Positionen Deutschlands und Frankreichs zur Europäischen Wirtschafts- und Währungsunion, Schäffer-Poeschel, 1999, p. 150 et seq. 53 Article 282(3) TFEU: ‘The European Central Bank shall have legal personality. It alone may authorise the issue of the euro. It shall be independent in the exercise of its powers and in the management of its finances. Union institutions, bodies, offices and agencies and the governments of the Member States shall respect that independence.’ 54 De Grauwe, P., Economics of Monetary Union, 10th ed., Oxford University Press, Oxford, 2014, pp. 156 to 159. 55 See Sparve, R., ‘Central bank Independence under European Union and other international standards’ in Legal Aspects of the European System of Central Banks. Liber Amicorum Paolo Zamboni Garavelli, ECB, Frankfurt am Main, 2005. 56 Ibid. 57 Concerning the independence of the ECB and its limits, see, in particular, Zilioli, C., and Selmayr, M., ‘The European Central Bank: An Independent Specialised Organisation of Community Law’, Common Market Law Review, No 37, 3, 2000, p. 591 et seq.; Dernedde, I., Autonomie der Europäische Zentralbank. Im Spannungsfeld zwischen demokratischer Legitimation der Europäischen Union und Währungsstabilität, Dr. Kovac, Hamburg, 2002; and, for a comparative perspective, Amtenbrink, F., The Democratic Accountability of Central Banks. A Comparative Study of the European Central Bank, Hart, Oxford-Portland, 1999. 58 See, although in different spheres from monetary policy, the judgments in Sison v Council (C‑266/05 P, EU:C:2007:75), paragraphs 32 to 34, Arcelor Atlantique et Lorraine and Others (C‑127/07, EU:C:2008:728), paragraph 57, and Vodafone and Others (C‑58/08, EU:C:2010:321), paragraph 52. 59 In this regard, see Louis, J.-V., L’Union européenne et sa monnaie, Commentaire J. Mégret, 3rd ed., Université de l’Université de Bruxelles, Brussels, 2009, p. 211; Craig, P., ‘EMU, the European Central Bank and Judicial Review’, in Beaumont, P., and Walker, N. (eds.), Legal Framework of the Single European Currency, Hart, Oxford-Portland, 1999, pp. 97 to 114, and Malatesta, A., La Banca Centrale Europea, Giuffrè, Milan, 2003, p. 183 et seq. 60 ‘The process through which monetary policy decisions affect the economy in general, and the price level in particular, is known as the transmission mechanism of monetary policy.’ The Monetary Policy of the ECB, ECB, Frankfurt am Main, 2011, p. 62. In this respect, see Angeloni, I., Kashyap, A., and Mojon, B. (eds.), Monetary Policy Transmission in the Euro Area, Cambridge University Press, Cambridge, 2003, and Suardi, M., ‘Monetary Policy Transmission in EMU’, in: Buti, M., and Sapir, A., EMU and Economic Policy In Europe. The Challenge of the Early Years, E. Elgar, Cheltenham-Northampton, 2002. 61 ‘The transmission of monetary impulses to the real sector involves a number of different mechanisms and actions by economic agents at various stages of the process. As a result, monetary policy action usually takes a considerable time to affect price developments. Furthermore, the size and strength of the different effects can vary according to the state of the economy, which makes the precise impact difficult to estimate. Taken together, central banks typically see themselves confronted with long, variable and uncertain lags in the conduct of monetary policy’, The Monetary Policy of the ECB, ECB, Frankfurt am Main, 2011, pp. 62 and 63. See also Angeloni, I., Kashyap, A. and Mojon, B. (eds.), op. cit. 62 On this point, see Cour-Thimann, P., and Winkler, B., ‘The ECB’s Non-Standard Monetary Policy Measures. The Role of Institutional Factors and Financial Structure’, Oxford Review of Economic Policy, 2012, 28, p. 72 et seq. 63 See the comparison carried out by Lenza, M., Pill, H., and Reichlin, L., ‘Monetary Policy in Exceptional Times’, Economic Policy (62) 2010, and García-Andrade, J., ‘El sistema Monetario en una Unión Europea de Derecho’, in Salvador Armendáriz, M.A. (Ed.), Regulación bancaria: transformación y Estado de Derecho, Aranzadi, Cizur Menor, 2014. 64 The ECB has used various unconventional measures in the past, such as a fixed-rate liquidity injection with full allotment, extension of the list of assets accepted as a guarantee, a longer-term liquidity injection or the purchase of specific debt securities. Concerning these measures, see Hinarejos, A., The Euro Area Crisis in Constitutional Perspective, Oxford University Press, Oxford, 2014, Chapter 3, point 3.1. 65 Pringle (EU:C:2012:756), paragraph 55. 66 Pringle (EU:C:2012:756), paragraph 56, and View of Advocate General Kokott (EU:C:2012:675), point 85. 67 View of Advocate General Kokott in Pringle (EU:C:2012:675), points 142 and 143. 68 Pringle (EU:C:2012:756), paragraph 135, states that ‘[c]ompliance with [budgetary] discipline contributes at Union level to the attainment of a higher objective, namely maintaining the financial stability of the monetary union’. 69 As the Commission points out in its written observations, the ECB’s Monthly Bulletins for September and October 2012 affirm on more than one occasion that the ultimate objective of the OMT programme is to restore the monetary policy transmission channels. 70 In so far as the conditions to which the purchase of bonds is subject may not be the same as those set by the EFSF/ESM, the programme is said to operate as a sort of ‘parallel rescue’. It is therefore my understanding that the two areas of uncertainty may be examined together. 71 According to Krugman and Wells, the expression ‘moral hazard’ refers to how, when making decisions, individuals are prepared to take greater risks when a third party, rather than they themselves, assumes responsibility for the possible negative consequences of their acts. On this point and in greater detail, see Krugman, P. and Wells, R., Microeconomics, 3rd ed., Worth Publishers, 2012. 72 See, specifically, Articles 4(4), 5(3) and (5)(g), 6(2), 13(1), (3) and (7) and 14(6) of the Treaty establishing the ESM. 73 For the ECB’s institutional role in bailouts, see Beukers, T., ‘The new ECB and its relationship with the eurozone Member States: Between central bank independence and central bank intervention’, Common Market Law Review (2013) 50, Issue 6, p. 1588 et seq. 74 See, specifically, Article 13(3) and (7) of the ESM Treaty. 75 See, by way of example, the general terms for financial assistance agreements, adopted by the ESM Board of Directors on 22 November 2012 (available at www.esm.europa.eu), confirming the ECB’s supervisory role in financial assistance programmes (see, specifically, Articles 3.3.2, 3.4.2, 5.3.4, 5.12.1, 6.2.6, 9.6, 9.8.2 and 12.2). 76 In fact, the literal wording of the ESM Treaty would permit action of that kind. The words ‘in liaison with the ECB’, used by the ESM Treaty in Articles 13 and 14, would allow the ECB to undertake a wide range of actions in the course of a financial assistance programme, including the ‘passive’ ones advocated here. 77 According to the case-law of the Court of Justice, the obligation to state reasons provided for in the Treaty does not entail ‘merely taking formal considerations into account, but seeks to give an opportunity to the parties of defending their rights, to the Court of Justice of exercising its supervisory function, and to Member States and all interested nationals of ascertaining the circumstances in which the [institution] has applied the Treaty’. See, inter alia, judgments in Germany v Commission (24/62, EU:C:1963:14), p. 69, and DIR International Film and Others v Commission (C‑164/98 P, EU:C:2000:48), paragraph 33. 78 Statement by the President of the ECB, Mr Draghi, at the press conference on 6 September 2012, available at http://www.ecb.europa.eu/press/pressconf/2012/html/is120906.en.html. 79 See, to this effect, judgments in National Panasonic v Commission (136/79, EU:C:1980:169), paragraphs 28 to 30, and Roquette Frères (C‑94/00, EU:C:2002:603), paragraph 77. 80 See, inter alia, judgments in Fédesa and Others (C‑331/88, EU:C:1990:391), paragraph 13, and Netherlands v Commission (C‑180/00, EU:C:2005:451), paragraph 103. 81 Written observations of the French Republic, which refer to the ‘targeted and provisional’ (‘ciblée et provisoire’) nature of the OMT programme (point 40). 82 The press release of 6 September 2012, as well as referring to the conditionality attached to the financial assistance programmes as a ‘necessary condition’, draws attention to the fact that suspension of the OMT programme will be decided upon by the Governing Council ‘in full discretion’ but ‘in accordance with its monetary policy mandate’. 83 See Tridimas, T., The General Principles of EU Law, 2nd ed., Oxford University Press, Oxford, 2010, Chapter 3. 84 In that regard, see Sunkel, O., and Griffith-Jones, S., Debt and Development Crises in Latin America: The End of an Illusion, Oxford University Press, Oxford, 1989. 85 See the Delors Report, cited in footnote 51, in particular point 30. 86 See Siekmann, H., ‘Law and Economics of Monetary Union’, in Eger, T., and Schäfer, H.-B., Research Handbook, on the Economics of European Union Law, E. Elgar, Cheltenham-Northampton, 2012, p. 370 et seq. 87 Pringle (EU:C:2012:756), paragraph 135. 88 Ibid., paragraph 132. 89 Compare the proposed wording of what was then Article 104a(1)(a) of the draft Treaty amending the Treaty establishing the European Economic Community with a view to establishing economic and monetary union, Bulletin of the European Communities, supplement 2/91, with the final wording of the provision, which is the same as the wording currently in force in Article 123 TFEU. Concerning the negotiations that culminated in the wording of the current Article 123 TFEU, see Conthe, M., ‘El Tratado de la Unión Europea: la Unión Económica y Monetaria’, in VVAA, España y el Tratado de la Unión Europea. Una aproximación al Tratado elaborada por el equipo negociador en las Conferencias Intergubernamentales sobre la Unión Política y la Unión Económica y Monetaria, Colex, 1994, pp. 295 to 297. 90 Concerning open market operations authorised by Article 18.1 of the Statute, see the Guideline of the ECB of 20 September 2011 on monetary policy instruments and procedures of the Eurosystem (recast) (ECB/2011/14). 91 Article 1(1)(b) of Regulation No 3603/93 adds, in point (ii), that ‘other type of credit facility’ is also to include ‘any financing of the public sector's obligations vis-à-vis third parties’. 92 Under the collective action clauses (‘CAC’) provided for in the event of restructuring, the restructuring is subject to the approval of a majority of the creditors. See, concerning CACs and the role of the ECB, Hofmann, C., ‘Enfranchisement and Disenfranchisement in Collective Action Clauses’, in Bauer, K-A., Cahn, A., and Kenadjian, S. (eds.), Collective Action Clauses and the Restructuring of Sovereign Debt, Institute for Law and Finance Series, De Gruyter, 2013, p. 56 et seq. 93 According to the ECB, not only is no obligation to hold the bonds until maturity laid down but, rather, the draft Decision relating to OMTs expressly provides for the possibility of the ECB selling the bonds at an earlier point. 94 That is the case, according to the ECB, of the Securities Market Programme (‘SMP’), under which securities were not necessarily held until maturity. 95 The ECB has stated in its written observations that the SMP programme, which predates the OMT programme, also provided for an embargo period.