It's worth reading the entire judgement of the German Constitutional Court on the ECB's Outright Monetary Transactions (OMT). The findings are a lot more damning than the headline version "German court refers OMT to ECJ" would have you believe. Among the points is as below which reveals that there were issues of philosophy as much as law in play --
The OMT Decision aims to neutralise spreads on government bonds of selected Member States of the euro currency area which have emerged in the markets and which adversely affect the refinancing of these Member States ... According to the European Central Bank, these spreads are partly based on fear – declared to be irrational – of investors of a reversibility of the euro. However, according to the convincing expertise of the Bundesbank, such interest rate spreads only reflect the scepticism of market participants that individual Member States will show sufficient budgetary discipline to stay permanently solvent. Pursuant to the design of the Treaty on the Functioning of the European Union, the existence of such spreads is entirely intended. ... In any case, according to explanations given by the Bundesbank, one cannot in practice divide interest rate spreads into a rational and an irrational part.
That last clause is critical. If the German perspective is that a financial market which embodies some irrationality is beyond thinking about in terms of interventions which might allow it to be more rational, then the whole policy stance towards those markets is going to be very different than if you think there are some selective interventions that can calm them down. Let's hope that the Eurozone financial crisis is close to resolution by the time the European Court of Justice makes a decision, because it's not at all clear what way will it go.
The OMT Decision aims to neutralise spreads on government bonds of selected Member States of the euro currency area which have emerged in the markets and which adversely affect the refinancing of these Member States ... According to the European Central Bank, these spreads are partly based on fear – declared to be irrational – of investors of a reversibility of the euro. However, according to the convincing expertise of the Bundesbank, such interest rate spreads only reflect the scepticism of market participants that individual Member States will show sufficient budgetary discipline to stay permanently solvent. Pursuant to the design of the Treaty on the Functioning of the European Union, the existence of such spreads is entirely intended. ... In any case, according to explanations given by the Bundesbank, one cannot in practice divide interest rate spreads into a rational and an irrational part.
That last clause is critical. If the German perspective is that a financial market which embodies some irrationality is beyond thinking about in terms of interventions which might allow it to be more rational, then the whole policy stance towards those markets is going to be very different than if you think there are some selective interventions that can calm them down. Let's hope that the Eurozone financial crisis is close to resolution by the time the European Court of Justice makes a decision, because it's not at all clear what way will it go.