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Academic asks court to exempt Germany from ECB bond purchases
May 30, 2017 / 10:50 AM / 2 months ago

Academic asks court to exempt Germany from ECB bond purchases

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FRANKFURT/KARLSRUHE, May 30 (Reuters) - A German academic is seeking an urgent court injunction to exempt the Bundesbank from buying billions of euros worth of bonds under the European Central Bank's stimulus programme, arguing the risks for taxpayers have become "unbearable".

German discontent at the ECB's 2.3 trillion euros ($2.57 trillion) bond-buying scheme, seen by some in Europe's richest country as a stealth bailout of indebted south European governments, has been exacerbated by a rebound in inflation in the last few months.

Markus Kerber, a lawyer and professor of public finance who filed a complaint against the asset-purchase programme (APP) last year, is requesting an urgent injunction exempting the Bundesbank from its share of the purchases.

As Germany has the largest share of all participating central banks, a granting of Kerber's request would jeopardise the scheme.

The German constitutional court in Karlsruhe last year rejected a challenge to a separate and yet-unused ECB emergency bond-buying scheme. That was widely seen as a precedent for five lawsuits against ECB purchases that are still pending there, including Kerber's.

Kerber says that a default on some of the government and company bonds bought by the Bundesbank would wipe out its equity and fears that a verdict on his complaint may not come in time.

"This procedure poses unbearable risks," he said in a statement published on the website of his Europolis thinktank.

A spokesman for the constitutional court said Kerber's request would be handled quickly but could not say when a decision would be made.

The Bundesbank, through its President Jens Weidmann, has long been sceptical of the scheme and it has set aside money against potential losses on the bonds it is buying as part of it.

The ECB's policy-setting body will meet again next week and is widely expected to acknowledge an economic improvement in the euro zone, paving the ground for a gradual reduction in its monetary stimulus in the coming months and years.

But Kerber said the issue could not wait.

"One cannot simply wait for a shift in the ECB’s policy and expect that risk to be eliminated," he said in the statement. "Now the Bundesbank must have the freedom to withdraw from the APP-Programme." ($1 = 0.8958 euros) (Reporting by Francesco Canepa in Frankfurt and Ursula Knapp in Karlsruhe; Editing by Mark Trevelyan)

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