first half of 2012 was not accompanied by an equivalent deterioration in those countries ’ fundamentals. at the same time, there was an acute risk that contagion would affect other euro area countries, pointing to systemic risks that were not limited to specific countries. a key factor driving those developments was fears in the markets regarding an involuntary break - up of the euro area – i. e. fears concerning the “ reversibility of the euro ” and the bis central bankers ’ speeches associated implicit exchange rate risk. this view was supported by model calculations which showed that, in july 2012, the spread that could not be attributed to fundamentals stood at up to 2 percentage points for italian and spanish two - year government bonds. there were also signs that international firms were hedging against the risk of individual member states leaving the euro area. britain ’ s financial supervision authorities were advising financial institutions to be prepared in the event of the euro area collapsing. moreover, spanish and italian banks lost their access to market - based financing instruments. between april and july 2012 spanish bank bonds to the value of €36 billion matured, but no more than €0. 5 billion of spanish bank bonds could be newly issued during that period. against that background, we had to conclude that, in individual parts of the euro area, the steering of monetary policy was not functioning fully, or was in part not functioning at all. the key interest rate had lost its key function, with considerable disruption of the transmission of monetary policy on account of the implicit exchange rate risk. this economic environment clearly pointed to a significant credit crunch and a severe decline in economic activity. there was a risk of an incipient deflationary spiral – a process involving continual declines in prices. price stability would then no longer have been ensured across the euro area. we in the governing council of the ecb discussed and debated at length the issue of what the european central bank should and had to do in such a situation in order to fulfil its tasks and responsibilities. effective action the instrument being considered had to be effective, in order to eliminate the unfounded fears regarding the reversibility of monetary union and the resulting interference with our monetary policy mandate. in setting up the omt programme, we learnt from our experience with the first bond buying programme from 2010 – the securities markets programme ( smp ) – and made the omts even more targeted. the omt programme differs from the smp in the following ways. first, there is strict

jorg asmussen : introductory statement by the ecb in the proceedings before the federal constitutional court introductory statement by mr jorg asmussen, member of the executive board of the european central bank, in the proceedings before the federal constitutional court, karlsruhe, 11 june 2013. * * * mr president, members of the federal constitutional court, introduction the federal constitutional court has invited the european central bank to comment on its monetary policy mandate, and particularly the decision taken by the governing council of the ecb in respect of the bond - buying programme, outright monetary transactions ( omts ). my aim is to demonstrate that our measures were necessary, that they are effective, and that they fall within the mandate of the ecb. i will confine myself to the most important aspects of our written statement, looking in particular at two aspects – the “ scope of monetary policy ” and the “ possible consequences of the ecb ’ s measures for national budgets ” – as specifically requested by the rapporteur for today ’ s oral proceedings. the necessity and effectiveness of the ecb ’ s actions let me first briefly explain why the european central bank opted for the omt programme. the need for monetary policy operations in order to understand the need for our monetary policy measures, it is important to be aware of the economic environment that we faced last summer. fears of an involuntary break - up of the single currency led to severe tensions in the capital markets. at the heart of those distortions lay turmoil in the government bond market – the largest capital market in the euro area. the government bond market is extremely important for price formation in other capital market sectors – for bank and corporate bonds, for example. spreads between the yields on the government bonds of euro area countries increased to levels that, in a number of cases, significantly exceeded those justified by fundamentals. yields on spanish and italian ten - year government bonds incorporated premia of more than 6 and 5 percentage points respectively relative to german government bonds. even at the short end of the yield curve, distortions could be observed : in july 2012 the yields on spanish and italian two - year government bonds peaked at 6. 6 % and 5. 1 % respectively, while the ecb ’ s main refinancing rate was 0. 75 % at that time. those spreads could, in part, be attributed to concerns by market participants regarding the sustainability of public finances. fiscal reasons alone did not provide a full explanation, however, because the rapid rise in spreads in the