ECB ‘more determined than ever’ to help euro zone economy

May 7, 2020

FRANKFURT (Reuters) – The European Central Bank is more determined than ever to help the recession-hit euro zone economy, ECB Vice President Luis de Guindos said on Thursday, days after a German court sought to place limits on its powers.

Facing an unprecedented threat from the German Constitutional Court, the comments from de Guindos suggest the ECB has no plans to hold back stimulus, even as it risks losing Germany as a participant in asset buys.

Germany’s Constitutional Court ruled on Tuesday that the ECB had exceeded its powers with 2 trillion euros of sovereign bond buys since 2015, and gave the bank three months to prove its moves were necessary and proportional. Otherwise, the Bundesbank will have to leave the stimulus scheme, it said.

“We remain more determined than ever to ensure supportive financial conditions across all sectors and countries to allow this unprecedented shock to be absorbed,” de Guindos told the European Parliament’s Committee on Economic and Monetary Affairs.

“We continue to stand ready to make further adjustments to our monetary policy measures should we see that the scale of the stimulus is falling short of what is needed,” he said.

Responding to questions about the court case, de Guindos said the ECB falls under the jurisdiction of the European Court of Justice, a comment suggesting the ECB may not engage the German court at all.

Addressing German concerns about a lack of proportionality in ECB decisions, he said the ECB assesses the side effects and documents proportionality before any policy decision.

De Guindos called for a bigger role of fiscal policy in the fight against recession, saying that ECB policy needed to be backed up.

“It is thus vital that the fiscal response to this crisis is sufficiently forceful, in all parts of the euro area,” de Guindos said. “There now needs to be a political agreement to build the appropriate instruments for this common response.”

(Reporting by Balazs Koranyi, Editing by Gareth Jones and Timothy Heritage)