Outright Monetary Transactions

As Outright Monetary Transactions ( OMT ) is called a by the European Central Bank ( ECB) Offered for the program under which the ECB may conduct business on the secondary market through short-term bonds issued by governments in the euro area. Technically, it is on transactions within the OMT program to outright open market transactions; they differ from the ordinary open market operations of the ECB only in its objective. The program should make it possible to reduce the interest rate on government securities of the countries and to facilitate their new borrowing. It is unlimited in its volume.

So far, the OMT program has been taken by any state in the claim (as of February 2014). However, it is assumed that its existence has already been exercised in the past, a soothing effect on the financial markets.

Conditions and operation

The modalities of the OMT program were decided by the Governing Council on 6 September 2012. OMTs can be used exclusively in the context of use of rescue facilities of the Eurosystem ( ESM or EFSF), which is not necessarily a full adjustment program must be run. It is necessary in any case, that part of the facility also primary market purchases of the affected state titles can be performed. The OMT program positions itself so far in terms of bond purchases in the secondary market as a complement.

The decision on the implementation and completion of OMTs the responsibility of the Governing Council. Questioning are mainly bonds with a maturity of between one and three years. The ECB complained for acquired under the OMT program papers no privileged creditor status (pari passu ). The purchases are intended sterilized nature to compensate them potentially outgoing effects of inflation. There is neither a time limit on the program or a volumetric limitation of the bought in the course of the OMT program state title.

Assessment

The European Central Bank does not OMT as a monetary state financing, which is prohibited by Article 123 of the TFEU. The Bundesbank rejects OMT off because the program to be close to a " public finance by printing money " because monetary policy was in danger of falling into the " tow of fiscal policy ," and because the interventions could redistribute substantial risks between taxpayers in different countries, to which the European Central Bank is not legitimate.

The OMT program is inter alia subject of several ( related ) proceedings before the German Federal Constitutional Court, the measures of the Eurosystem relate to the context of the Euro crisis and its verdict is expected on March 18, 2014. By order of 17 December 2013 the court separated from the relating to the OMT - decision procedure objects from the main action; By order of 14 January 2014, suspended the procedure severed and sent several questions referred for a preliminary ruling to the European Court. Main subject of the submission is the compatibility of the OMT - decision with the mandate of the European Central Bank. The Federal Constitutional Court said that while, in a decision with 6:2 votes conclusion that the OMT program should not be covered by the mandate of the European Central Bank, in his view, because it is " no longer [ is ] as monetary policy, but as a predominantly economic policy measure which ". Thus, the European Central Bank had exceeded its jurisdiction and act ultra vires. However, the European Court could limit the OMT decision in its validity or cause the primary law conforming interpretation which is compatible with the Basic Law. This presupposes well that a haircut is excluded, not bought government bonds of individual Member States, in unlimited amounts intervention in price formation on the market as far as possible avoided.