## Facts

- The European Central Bank (ECB) announced the Outright Monetary Transactions (OMT) programme in September 2012, expressing willingness to buy euro-area Member State government bonds on secondary markets in potentially unlimited amounts, subject to EFSF/ESM-related conditionality.
- The ECB stated that OMT aimed to address severe distortions in government bond markets that impaired the monetary-policy transmission mechanism and threatened the singleness of monetary policy in the euro area.
- Various German complainants, including members of the Bundestag and a parliamentary group, challenged OMT in proceedings before the German Federal Constitutional Court, arguing OMT exceeded the ECB’s mandate and violated the Treaty prohibition on monetary financing.
- The German Federal Constitutional Court made a preliminary reference to the Court of Justice of the European Union (CJEU) seeking interpretation of the ECB’s competences and the legality of a program like OMT under EU law.
- A threshold question was whether the reference was admissible because OMT had been announced but not implemented.

## Issues

1. Whether a preliminary reference is admissible when the challenged ECB programme has only been announced and not implemented.
2. Whether a bond-purchase programme like OMT falls within the ECB’s monetary-policy mandate (rather than economic policy) under EU law.
3. Whether OMT violates the prohibition on monetary financing in Article 123(1) TFEU despite operating in secondary markets.
4. Whether OMT satisfies proportionality limits applicable to ECB action.

## Decision

- The CJEU held the preliminary reference admissible notwithstanding that OMT had not been implemented, because the referring court needed an EU-law ruling to decide pending national proceedings.
- The CJEU held that EU law permits a secondary-market government bond-purchase programme such as OMT as an instrument of monetary policy.
- The CJEU concluded that OMT, as described, does not infringe Article 123(1) TFEU provided it is implemented with safeguards preventing effects equivalent to prohibited direct purchases or other monetary financing.
- The CJEU held the programme proportionate in light of its stated monetary-policy objectives and the ECB’s discretion in complex economic assessments, subject to limited judicial review for manifest error or misuse of powers.

## Legal Principles

- A preliminary reference may be admissible even if the EU measure at issue is unimplemented, where an EU-law answer is necessary for the national court’s resolution of the case.
- Classification of ECB action turns primarily on objectives and instruments; significant economic effects do not, by themselves, recharacterize a measure as economic policy if its primary objective is monetary policy (including safeguarding transmission of monetary policy).
- Proportionality review requires that ECB measures be suitable to achieve legitimate monetary-policy objectives and not exceed what is necessary; in technical economic matters, the ECB has broad discretion and judicial review is limited to manifest error or misuse of powers.
- Article 123(1) TFEU prohibits direct purchases of Member State debt and other forms of monetary financing, but does not bar secondary-market purchases that are structured to avoid circumvention.
- Compatibility with Article 123(1) depends on safeguards such as: limiting purchases to secondary markets; ensuring a time gap between issuance and purchase; avoiding ex ante assurances of systematic or full purchases; preserving market discipline; and preventing programme design from predetermining or neutralizing primary-market issuance outcomes.

## Conclusion

The CJEU upheld the legality in principle of the ECB’s announced OMT programme as a monetary-policy measure, finding it consistent with proportionality and compatible with Article 123(1) TFEU so long as implementation includes safeguards that prevent the programme from operating as the functional equivalent of direct monetary financing of Member States.


Gauweiler v. Deutscher Bundestag, Case C-62/14 (C.J.E.U. 2015)