The policy of quantitative easing (QE) – where the central bank buys large amounts of assets using new bank reserves – is expected to be announced at the European Central Bank’s (ECB) next meeting on 22 January. However, a court statement released yesterday regarding a legal challenge to a previous policy could have influenced how QE was done.
The previous policy, called Outright Monetary Transactions (OMT), was put in place in 2012 and promised to buy government bonds in unlimited amounts in an emergency.
Its legality was challenged by the German Constitutional Court.
However, an official at the European Court of Justice yesterday said the OMT was “compatible in principle” with EU law.
The statement should help to quell nerves about the future health of the Eurozone economy.
In contrast, Finland’s Prime Minister Alex Stubb added to uncertainty by saying he would oppose debt forgiveness for Greece and would be reluctant to back another rescue package.
“We will remain tough. It is clear that we would say a resounding no to forgiving the loans,” Stubb told the Financial Times.
Greece’s snap general election will be held on 25 January, three days after the ECB is expected to either launch or formally announce its QE programme.