| Abstract: | The ECB’s government bond purchases have become an issue for the German constitutional court. The authors see the OMT programme as falling within the bounds of its mandate but call for the ECB’s crisis policies to be strictly temporary. They argue that the OMT programme was necessary to safeguard fi nancial stability and that it does not endanger price stability in the short term. Moreover, they present evidence for the breakdown of the monetary policy transmission mechanism in the crisis countries and argue that the conditions for forbidden monetary government fi nancing are not met — provided the ECB sticks to certain conditions. Particularly, the ECB’s government bond purchases must maintain a clear distinction between the primary market and a functioning secondary market. |
