Today 21 June 2016 the BVerfG has affirmed the legality of Mario Draghi’s OMT programme. In doing so, it followed the lead of the CJEU. Nothing remarkable here, but two important issues arise:
- the BVerfG had initially insisted on a ban on debt restructures (no pari passu treatment of ECB held bonds in case of a sovereign default). This is absent from the final decision.
- the exclusion of Greece (or any other non-conforming/non-rescue programme participating Euro member state) is a prerequisite for the legality (no direct financing Treaty provisions) of ECB actions.
We learn this therefore: The ECB can do ‘whatever it takes’ so long as the Eurozone remains under strict supervision and conditionality. Otherwise the ECB is exposed to risk of loss that would be considered illegal.
This is not necessarily good news for Greece, or anyone planning ‘alternate’ paths (think Spanish election).