European court set to rule on ECB’s OMT program

The European Court of Justice is set to give an interim verdict on the legality of the European Central Bank’s Outright Monetary Transactions, the central bank’s current bond-buying program, on Wednesday. At issue is whether the ECB has the ability under European Union law to use unconventional monetary policies, following a legal challenge from German opponents to OMT. Germany’s Constitutional Court was asked to rule on the case, but referred the decision to the ECJ in February last year. The OMT program, which has never been used, is credited with easing the eurozone’s debt crisis by easing fears on Spanish and Italian borrowing costs. The ECJ decision, expected at 8:30 a.m. London time, or 3:30 a.m Eastern Time. is seen as possibly chilling the prospect of quantitative easing from the ECB if it finds OMT not legal.

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